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G.R. No.

131282 January 4, 2002

GABRIEL L. DUERO, petitioner,


vs.
HON.COURT OF APPEALS, and BERNARDO A. ERADEL, respondents.

QUISUMBING, J.:

This petition for certiorari assails the Decisionl dated September 17, 1997, of the Court of
Appeals in CA-G.R. No. SP No.. 2340- UDK, entitled Bernardo Eradel vs. Non. Ermelino G.
Andal, setting aside all proceedings in Civil Case No.1075, Gabriel L. Duero vs. Bernardo
Eradel, before the Branch 27 of the Regional Trial Court of Tandag, Surigao del Sur .

The pertinent facts are as follow.

Sometime in 1988, according to petitioner, private respondent Bemardo Eradel 2 entered and
occupied petitioner's land covered by Tax Declaration No. A-16-13-302, located in Baras,
San Miguel, Surigao del Sur. As shown in the tax declaration, the land had an assessed
value of P5,240. When petitioner politely informed private respondent that the land was his
and requested the latter to vacate the land, private respondent refused, but instead
threatened him with bodily harm. Despite repeated demands, private respondent remained
steadfast in his refusal to leave the land.

On June 16, 1995, petitioner filed before the RTC a complaint for Recovery of Possession
and Ownership with Damages and Attorney's Fees against private respondent and two
others, namely, Apolinario and Inocencio Ruena. Petitioner appended to the complaint the
aforementioned tax declaration. The counsel of the Ruenas asked for extension to file their
Answer and was given until July 18, 1995. Meanwhile, petitioner and the, Ruenas executed a
compromise agreement, which became the trial court's basis for a partial judgment rendered
on January 12, 1996. In this agreement, the Ruenas through their counsel, Atty. Eusebio
Avila, entered into a Compromise Agreement with herein petitioner, Gabriel Duero. Inter alia,
the agreement stated that the Ruenas recognized and bound themselves to respect the
ownership and possession of Duero.3 Herein private respondent Eradel was not a party to the
agreement, and he was declared in default for failure to file his answer to the complaint.4

Petitioner presented his evidence ex parte on February 13, 1996. On May 8, 1996, judgment
was rendered in his favor, and private respondent was ordered to peacefully vacate and turn
over Lot No.1065 Cad. 537-D to petitioner; pay petitioner P2,000 annual rental from 1988 up
the time he vacates the land, and P5,000 as attorney's fees and the cost of the suit.5 Private
respondent received a copy of the decision on May 25, 1996.

On June 10, 1996, private respondent filed a Motion for New Trial, alleging that he has been
occupying the land as a tenant of Artemio Laurente, Sr., since 1958. He explained that he
turned over the complaint and summons to Laurente in the honest belief that as landlord, the
latter had a better right to the land and was responsible to defend any adverse claim on it.
However, the trial court denied the motion for new trial.
1âwphi1.nêt

Meanwhile, RED Conflict Case No.1029, an administrative case between petitioner and
applicant-contestants Romeo, Artemio and Jury Laurente, remained pending with the Office
of the Regional Director of the Department of Environment and Natural Resources in Davao
City. Eventually, it was forwarded to the DENR Regional Office in Prosperidad, Agusan del
Sur .
On July 24, 1996, private respondent filed before the RTC a Petition for Relief from
Judgment, reiterating the same allegation in his Motion for New Trial. He averred that unless
there is a determination on who owned the land, he could not be made to vacate the land.
He also averred that the judgment of the trial court was void inasmuch as the heirs of
Artemio Laurente, Sr., who are indispensable parties, were not impleaded.

On September 24, 1996, Josephine, Ana Soledad and Virginia, all surnamed Laurente,
grandchildren of Artemio who were claiming ownership of the land, filed a Motion for
Intervention. The RTC denied the motion.

On October 8, 1996, the trial court issued an order denying the Petition for Relief from
Judgment. In a Motion for Reconsideration of said order, private respondent alleged that the
RTC had no jurisdiction over the case, since the value of the land was only P5,240 and
therefore it was under the jurisdiction of the municipal trial court. On November 22, 1996, the
RTC denied the motion for reconsideration.

On January 22, 1997, petitioner filed a Motion for Execution, which the RTC granted on
January 28. On February 18, 1997, Entry of Judgment was made of record and a writ of
execution was issued by the RTC on February 27,1997. On March 12,1997, private
respondent filed his petition for certiorari before the Court of Appeals.

The Court of Appeals gave due course to the petition, maintaining that private respondent is
not estopped from assailing the jurisdiction 'of the RTC, Branch 27 in Tandag, Surigao del
Sur, when private respondent filed with said court his Motion for Reconsideration And/Or
Annulment of Judgment. The Court of Appeals decreed as follows:

IN THE LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. All


proceedings in "Gabriel L. Duero vs. Bernardo Eradel, et. al. Civil Case 1075" filed in
the Court a quo, including its Decision, Annex "E" of the petition, and its Orders and
Writ of Execution and the turn over of the property to the Private Respondent by the
Sheriff of the Court a quo, are declared null and void and hereby SET ASIDE, No
pronouncement as to costs.

SO ORDERED.6

Petitioner now comes before this Court, alleging that the Court of Appeals acted with grave
abuse of discretion amounting to lack or in excess of jurisdiction when it held that:

I.

...THE LOWER COURT HAS NO JURISDICTION OVER THE SUBJECT MA TTER


OF THE CASE.

II

...PRIVATE RESPONDENT WAS NOT THEREBY ESTOPPED FROM


QUESTIONING THE JURISDICTION OF THE LOWER COURT EVEN AFTER IT
SUCCESSFULLY SOUGHT AFFIRMATIVE RELIEF THEREFROM.

III
...THE FAlLURE OF PRIVATE RESPONDENT TO FILE HIS ANSWER IS
JUSTIFIED. 7

The main issue before us is whether the Court of Appeals gravely abused its discretion when
it held that the municipal trial court had jurisdiction, and that private respondent was not
estopped from assailing the jurisdiction of the RTC after he had filed several motions before
it. The secondary issue is whether the Court of appeals erred in holding that private
respondent's failure to file an answer to the complaint was justified.

At the outset, however, we note that petitioner through counsel submitted to this Court
pleadings that contain inaccurate statements. Thus, on page 5 of his petition,8 we find that to
bolster the claim that the appellate court erred in holding that the RTC had no jurisdiction,
petitioner pointed to Annex E9 of his petition which supposedly is the Certification issued by
the Municipal Treasurer of San Miguel, Surigao, specifically containing the notation, "Note:
Subject for General Revision Effective 1994." But it appears that Annex E of his petition is
not a Certification but a xerox copy of a Declaration of Real Property. Nowhere does the
document contain a notation, "Note: Subject for General Revision Effective 1994." Petitioner
also asked this Court to refer to Annex F,10 where he said the zonal value of the disputed land
was P1.40 per sq.m., thus placing the computed value of the land at the time the complaint
was filed before the RTC at P57,113.98, hence beyond the jurisdiction of the municipal court
and within the jurisdiction of the regional trial court. However, we find that these annexes are
both merely xerox copies. They are obviously without evidentiary weight or value.

Coming now to the principal issue, petitioner contends that respondent appellate court acted
with grave abuse of discretion. By "grave abuse of discretion" is meant such capricious and
whimsical exercise of judgment which is equivalent to an excess or a lack of jurisdiction. The
abuse of discretion must be so patent and gross as to amount to an evasion of a positive
duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of
law as where the power is exercised in an arbitrary and despotic manner by reason of
passion or hostility.11 But here we find that in its decision holding that the municipal court has
jurisdiction over the case and that private respondent was not estopped from questioning the
jurisdiction of the RTC, respondent Court of Appeals discussed the facts on which its
decision is grounded as well as the law and jurisprudence on the matter.12 Its action was
neither whimsical nor capricious.

Was private respondent estopped from questioning the jurisdiction of the RTC? In this case,
we are in agreement with the Court of Appeals that he was not. While participation in all
stages of a case before the trial court, including invocation of its authority in asking for
affirmative relief, effectively bars a party by estoppel from challenging the court's
jurisdiction,13 we note that estoppel has become an equitable defense that is both substantive
and remedial and its successful invocation can bar a right and not merely its equitable
enforcement.14 Hence, estoppel ought to be applied with caution. For estoppel to apply, the
action giving rise thereto must be unequivocal and intentional because, if misapplied,
estoppel may become a tool of injustice.15

In the present case, private respondent questions the jurisdiction of RTC in Tandag, Surigao
del Sur, on legal grounds. Recall that it was petitioner who filed the complaint against private
respondent and two other parties before the said court,16 believing that the RTC had
jurisdiction over his complaint. But by then, Republic Act 769117 amending BP 129 had
become effective, such that jurisdiction already belongs not to the RTC but to the MTC
pursuant to said amendment. Private respondent, an unschooled farmer, in the mistaken
belief that since he was merely a tenant of the late Artemio Laurente Sr., his landlord, gave
the summons to a Hipolito Laurente, one of the surviving heirs of Artemio Sr., who did not do
anything about the summons. For failure to answer the complaint, private respondent was
declared in default. He then filed a Motion for New Trial in the same court and explained that
he defaulted because of his belief that the suit ought to be answered by his landlord. In that
motion he stated that he had by then the evidence to prove that he had a better right than
petitioner over the land because of his long, continuous and uninterrupted possession
as bona-fide tenant-lessee of the land.18 But his motion was denied. He tried an alternative
recourse. He filed before the RTC a Motion for Relief from Judgment. Again, the same court
denied his motion, hence he moved for reconsideration of the denial. In his Motion for
Reconsideration, he raised for the first time the RTC's lack of jurisdiction. This motion was
again denied. Note that private respondent raised the issue of lack of jurisdiction, not when
the case was already on appeal, but when the case, was still before the RTC that ruled him
in default, denied his motion for new trial as well as for relief from judgment, and denied
likewise his two motions for reconsideration. After the RTC still refused to reconsider the
denial of private respondent's motion for relief from judgment, it went on to issue the order
for entry of judgment and a writ of execution.

Under these circumstances, we could not fault the Court of Appeals in overruling the RTC
and in holding that private respondent was not estopped from questioning the jurisdiction of
the regional trial court. The fundamental rule is that, the lack of jurisdiction of the court over
an action cannot be waived by the parties, or even cured by their silence, acquiescence or
even by their express consent.19 Further, a party may assail the jurisdiction of the court over
the action at any stage of the proceedings and even on appeal.20 The appellate court did not
err in saying that the RTC should have declared itself barren of jurisdiction over the action.
Even if private respondent actively participated in the proceedings before said court, the
doctrine of estoppel cannot still be properly invoked against him because the question of lack
of jurisdiction may be raised at anytime and at any stage of the action.21 Precedents tell us
that as a general rule, the jurisdiction of a court is not a question of acquiescence as a matter
of fact, but an issue of conferment as a matter of law.22 Also, neither waiver nor estoppel shall
apply to confer jurisdiction upon a court, barring highly meritorious and exceptional
circumstances.23 The Court of Appeals found support for its ruling in our decision in Javier vs.
Court of Appeals, thus:

x x x The point simply is that when a party commits error in filing his suit or
proceeding in a court that lacks jurisdiction to take cognizance of the same, such act
may not at once be deemed sufficient basis of estoppel. It could have been the result
of an honest mistake, or of divergent interpretations of doubtful legal provisions. If
any fault is to be imputed to a party taking such course of action, part of the
blame should be placed on the court which shall entertain the suit, thereby
lulling the parties into believing that they pursued their remedies in the correct
forum. Under the rules, it is the duty of the court to dismiss an action 'whenever it
appears that the court has no jurisdiction over the subject matter.' (Sec. 2, Rule 9,
Rules of Court) Should the Court render a judgment without jurisdiction, such
judgment may be impeached or annulled for lack of jurisdiction (Sec. 30, Rule 132,
Ibid), within ten (10) years from the finality of the same. [Emphasis ours.]24

Indeed, "...the trial court was duty-bound to take judicial notice of the parameters of its
jurisdiction and its failure to do so, makes its decision a 'lawless' thing."25

Since a decision of a court without jurisdiction is null and void, it could logically never
become final and executory, hence appeal therefrom by writ of error would be out of the
question. Resort by private respondent to a petition for certiorari before the Court of Appeals
was in order .
In holding that estoppel did not prevent private respondent from questioning the RTC's
jurisdiction, the appellate court reiterated the doctrine that estoppel must be applied only in
exceptional cases, as its misapplication could result in a miscarriage of justice. Here, we find
that petitioner, who claims ownership of a parcel of land, filed his complaint before a court
without appropriate jurisdiction. Defendant, a farmer whose tenancy status is still pending
before the proper administrative agency concerned, could have moved for dismissal of the
case on jurisdictional grounds. But the farmer as defendant therein could not be expected to
know the nuances of jurisdiction and related issues. This farmer, who is now the private
respondent, ought not to be penalized when he claims that he made an honest mistake when
he initially submitted his motions before the RTC, before he realized that the controversy was
outside the RTC's cognizance but within the jurisdiction of the municipal trial court. To hold
him in estoppel as the RTC did would amount to foreclosing his avenue to obtain a proper
resolution of his case. Furthermore, if the RTC's order were to be sustained, he would be
evicted from the land prematurely, while RED Conflict Case No.1029 would remain
unresolved. Such eviction on a technicality if allowed could result in an injustice, if it is later
found that he has a legal right to till the land he now occupies as tenant-lessee. 1âwphi1.nêt

Having determined that there was no grave abuse of discretion by the appellate court in
ruling that private respondent was not estopped from questioning the jurisdiction of the RTC,
we need not tarry to consider in detail the second issue. Suffice it to say that, given the
circumstances in this case, no error was committed on this score by respondent appellate
court. Since the RTC had no jurisdiction over the case, private respondent had justifiable
reason in law not to file an answer, aside from the fact that he believed the suit was properly
his landlord's concern.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals
is AFFIRMED. The decision of the Regional Trial Court in Civil Case No.1075
entitled Gabriel L. Duero vs. Bernardo Eradel, its Order that private respondent turn over the
disputed land to petitioner, and the Writ of Execution it issued, are ANNULLED and SET
ASIDE. Costs against petitioner .

SO ORDERED.

Bellosillo, Mendoza, De Leon, Jr., JJ., concur. Buena, J., on official leave.
G.R. No. 129638 December 8, 2003

ANTONIO T. DONATO, petitioner,


vs.
COURT OF APPEALS, FILOMENO ARCEPE, TIMOTEO BARCELONA, IGNACIO
BENDOL, THELMA P. BULICANO, ROSALINDA CAPARAS, ROSITA DE COSTO,
FELIZA DE GUZMAN, LETICIA DE LOS REYES, ROGELIO GADDI, PAULINO
GAJARDO, GERONIMO IMPERIAL, HOMER IMPERIAL, ELVIRA LESLIE, CEFERINO
LUGANA, HECTOR PIMENTEL, NIMFA PIMENTEL, AURELIO G. ROCERO, ILUMINADA
TARA, JUANITO VALLESPIN, and NARCISO YABUT, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a "petition for review on certiorari" filed on July 17, 1997 which should be a
petition for certiorari under Rule 65 of the Rules of Court. It assails the Resolutions 1 dated
March 21, 1997 and June 23, 1997 issued by the Court of Appeals in CA-G.R. SP No.
41394.2

The factual background of the case is as follows:

Petitioner Antonio T. Donato is the registered owner of a real property located at Ciriaco
Tuason Street, San Andres, Manila, covered by Transfer Certificate of Title No. 131793
issued by the Register of Deeds of the City of Manila on November 24, 1978. On June 7,
1994, petitioner filed a complaint before the Metropolitan Trial Court (Branch 26) of Manila
(MeTC) for forcible entry and unlawful detainer against 43 named defendants and "all
unknown occupants" of the subject property.3

Petitioner alleges that: private respondents had oral contracts of lease that expired at the
end of each month but were impliedly renewed under the same terms by mere acquiescence
or tolerance; sometime in 1992, they stopped paying rent; on April 7, 1994, petitioner sent
them a written demand to vacate; the non-compliance with said demand letter constrained
him to file the ejectment case against them.4

Of the 43 named defendants, only 20 (private respondents,5 for brevity) filed a consolidated
Answer dated June 29, 1994 wherein they denied non-payment of rentals. They contend that
they cannot be evicted because the Urban Land Reform Law guarantees security of tenure
and priority right to purchase the subject property; and that there was a negotiation for the
purchase of the lots occupied by them but when the negotiation reached a passive stage,
they decided to continue payment of rentals and tendered payment to petitioner’s counsel
and thereafter initiated a petition for consignation of the rentals in Civil Case No. 144049
while they await the outcome of the negotiation to purchase.

Following trial under the Rule on Summary Procedure, the MeTC rendered judgment on
September 19, 1994 against the 23 non-answering defendants, ordering them to vacate the
premises occupied by each of them, and to pay jointly and severally ₱10,000.00 per month
from the date they last paid their rent until the date they actually vacate, plus interest thereon
at the legal rate allowed by law, as well as ₱10,000.00 as attorney’s fees and the costs of the
suit. As to the 20 private respondents, the MeTC issued a separate judgment6 on the same
day sustaining their rights under the Land Reform Law, declaring petitioner’s cause of action
as not duly warranted by the facts and circumstances of the case and dismissing the case
without prejudice.

Not satisfied with the judgment dismissing the complaint as against the private respondents,
petitioner appealed to the Regional Trial Court (Branch 47) of Manila (RTC).7 In a
Decision8 dated July 5, 1996, the RTC sustained the decision of the MeTC.

Undaunted, petitioner filed a petition for review with the Court of Appeals (CA for brevity),
docketed as CA-G.R. SP No. 41394. In a Resolution dated March 21, 1997, the CA
dismissed the petition on two grounds: (a) the certification of non-forum shopping was signed
by petitioner’s counsel and not by petitioner himself, in violation of Revised Circular No. 28-
91;9 and, (b) the only annex to the petition is a certified copy of the questioned decision but
copies of the pleadings and other material portions of the record as would support the
allegations of the petition are not annexed, contrary to Section 3, paragraph b, Rule 6 of the
Revised Internal Rules of the Court of Appeals (RIRCA).10

On April 17, 1997, petitioner filed a Motion for Reconsideration,11 attaching thereto a
photocopy of the certification of non-forum shopping duly signed by petitioner himself12 and
the relevant records of the MeTC and the RTC.13 Five days later, or on April 22, 1997,
petitioner filed a Supplement14 to his motion for reconsideration submitting the duly
authenticated original of the certification of non-forum shopping signed by petitioner.15

In a Resolution16 dated June 23, 1997 the CA denied petitioner’s motion for reconsideration
and its supplement, ruling that "petitioner’s subsequent compliance did not cure the defect in
the instant petition."17

Hence, the present petition anchored on the following grounds:

I.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE PETITION


BASED ON HYPER-TECHNICAL GROUNDS BECAUSE:

A. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SUPREME


COURT CIRCULAR NO. 28-91. MORE, PETITIONER SUBSEQUENTLY
SUBMITTED DURING THE PENDENCY OF THE PROCEEDINGS A DULY
AUTHENTICATED CERTIFICATE OF NON-FORUM SHOPPING WHICH HE
HIMSELF SIGNED AND EXECUTED IN THE UNITED STATES.

B. PETITIONER HAS SUBSTANTIALLY COMPLIED WITH SECTION 3,


RULE 6 OF THE REVISED INTERNAL RULES OF THE COURT OF
APPEALS. MORE, PETITIONER SUBSEQUENTLY SUBMITTED DURING
THE PENDENCY OF THE PROCEEDINGS COPIES OF THE RELEVANT
DOCUMENTS IN THE CASES BELOW.

C. PETITIONER HAS A MERITORIOUS APPEAL, AND HE STANDS TO


LOSE SUBSTANTIAL PROPERTY IF THE APPEAL IS NOT GIVEN DUE
COURSE. THE RULES OF PROCEDURE MUST BE LIBERALLY
CONSTRUED TO DO SUBSTANTIAL JUSTICE.

II.
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT ALL THE
ELEMENTS OF UNLAWFUL DETAINER ARE PRESENT IN THE CASE AT BAR.

III.

RESPONDENT COURT OF APPEALS ERRED IN NOT RULING THAT THE RTC MANILA,
BRANCH 47, COMMITTED REVERSIBLE ERROR IN AFFIRMING THE FINDING OF MTC
MANILA, BRANCH 26, THAT PRIVATE RESPONDENTS CANNOT BE EJECTED FROM
THE SUBJECT PROPERTY WITHOUT VIOLATING THEIR SECURITY OF TENURE EVEN
IF THE TERM OF THE LEASE IS MONTH-TO-MONTH WHICH EXPIRES AT THE END OF
EACH MONTH. IN THIS REGARD,

A. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT


THE RTC MANILA COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT TENANTS UNDER P.D. 1517 MAY BE EVICTED FOR NON-
PAYMENT OF RENT, TERMINATION OF LEASE OR OTHER GROUNDS
FOR EJECTMENT.

B. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT


THE RTC MANILA COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT THE ALLEGED "PRIORITY RIGHT TO BUY THE LOT THEY
OCCUPY" DOES NOT APPLY WHERE THE LANDOWNER DOES NOT
INTEND TO SELL THE SUBJECT PROPERTY, AS IN THE CASE AT BAR.

C. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT


THE RTC MANILA COMMITTED REVERSIBLE ERROR IN RULING THAT
THE SUBJECT PROPERTY IS LOCATED WITHIN A ZONAL
IMPROVEMENT AREA OR APD.

D. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT


THE RTC MANILA COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT PRIVATE RESPONDENTS’ NON-COMPLIANCE WITH THE
CONDITIONS UNDER THE LAW RESULT IN THE WAIVER OF
PROTECTION AGAINST EVICTION.

E. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT


THE RTC MANILA COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT PRIVATE RESPONDENTS CANNOT BE ENTITLED TO
PROTECTION UNDER P.D. 2016 SINCE THE GOVERNMENT HAS NO
INTENTION OF ACQUIRING THE SUBJECT PROPERTY.

F. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT


THE RTC MANILA COMMITTED REVERSIBLE ERROR IN FINDING THAT
THERE IS AN ON-GOING NEGOTIATION FOR THE SALE OF THE
SUBJECT PROPERTY AND THAT IT RENDERS THE EVICTION OF
PRIVATE RESPONDENTS PREMATURE.

G. RESPONDENT COURT OF APPEALS SHOULD HAVE RULED THAT


THE RTC MANILA COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT THE ALLEGED CASE FOR CONSIGNATION DOES NOT BAR THE
EVICTION OF PRIVATE RESPONDENTS.
IV.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT


RESPONDENTS SHOULD PAY PETITIONER A REASONABLE COMPENSATION FOR
THEIR USE AND OCCUPANCY OF THE SUBJECT PROPERTY IN THE AMOUNT OF AT
LEAST ₱10,000.00 PER MONTH FROM THE DATE THEY LAST PAID RENT UNTIL THE
TIME THEY ACTUALLY VACATE THE SAME, WITH LEGAL INTEREST AT THE
MAXIMUM RATE ALLOWED BY LAW UNTIL PAID.

V.

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT


RESPONDENTS SHOULD PAY PETITIONER ATTORNEY’S FEES AND EXPENSES OF
LITIGATION OF AT LEAST ₱20,000.00, PLUS COSTS.18

Petitioner submits that a relaxation of the rigid rules of technical procedure is called for in
view of the attendant circumstances showing that the objectives of the rule on certification of
non-forum shopping and the rule requiring material portions of the record be attached to the
petition have not been glaringly violated and, more importantly, the petition is meritorious.

The proper recourse of an aggrieved party from a decision of the CA is a petition for review
on certiorari under Rule 45 of the Rules of Court. However, if the error, subject of the
recourse, is one of jurisdiction, or the act complained of was perpetrated by a court with
grave abuse of discretion amounting to lack or excess of jurisdiction, the proper remedy
available to the aggrieved party is a petition for certiorari under Rule 65 of the said Rules. As
enunciated by the Court in Fortich vs. Corona:19

Anent the first issue, in order to determine whether the recourse of petitioners is proper or
not, it is necessary to draw a line between an error of judgment and an error of jurisdiction.
An error of judgment is one which the court may commit in the exercise of its jurisdiction, and
which error is reviewable only by an appeal. On the other hand, an error of jurisdiction is one
where the act complained of was issued by the court, officer or a quasi-judicial body without
or in excess of jurisdiction, or with grave abuse of discretion which is tantamount to lack or in
excess of jurisdiction. This error is correctible only by the extraordinary writ of
certiorari.20 (Emphasis supplied).

Inasmuch as the present petition principally assails the dismissal of the petition on ground of
procedural flaws involving the jurisdiction of the court a quo to entertain the petition, it falls
within the ambit of a special civil action for certiorari under Rule 65 of the Rules of Court.

At the time the instant petition for certiorari was filed, i.e., on July 17, 1997, the prevailing
rule is the newly promulgated 1997 Rules of Civil Procedure. However, considering that the
CA Resolution being assailed was rendered on March 21, 1997, the applicable rule is the
three-month reglementary period, established by jurisprudence.21 Petitioner received notice of
the assailed CA Resolution dismissing his petition for review on April 4, 1997. He filed his
motion reconsideration on April 17, 1997, using up only thirteen days of the 90-day period.
Petitioner received the CA Resolution denying his motion on July 3, 1997 and fourteen days
later, or on July 17, 1997, he filed a motion for 30-day extension of time to file a "petition for
review" which was granted by us; and petitioner duly filed his petition on August 15, 1997,
which is well-within the period of extension granted to him.

We now go to the merits of the case.


We find the instant petition partly meritorious.

The requirement regarding the need for a certification of non-forum shopping in cases filed
before the CA and the corresponding sanction for non-compliance thereto are found in the
then prevailing Revised Circular No. 28-91.22 It provides that the petitioner himself must make
the certification against forum shopping and a violation thereof shall be a cause for the
summary dismissal of the multiple petition or complaint. The rationale for the rule of personal
execution of the certification by the petitioner himself is that it is only the petitioner who has
actual knowledge of whether or not he has initiated similar actions or proceedings in other
courts or tribunals; even counsel of record may be unaware of such fact.23 The Court has
ruled that with respect to the contents of the certification, the rule on substantial compliance
may be availed of. This is so because the requirement of strict compliance with the rule
regarding the certification of non-forum shopping simply underscores its mandatory nature in
that the certification cannot be altogether dispensed with or its requirements completely
disregarded, but it does not thereby interdict substantial compliance with its provisions under
justifiable circumstances.24

The petition for review filed before the CA contains a certification against forum shopping but
said certification was signed by petitioner’s counsel. In submitting the certification of non-
forum shopping duly signed by himself in his motion for reconsideration,25 petitioner has aptly
drawn the Court’s attention to the physical impossibility of filing the petition for review within
the 15-day reglementary period to appeal considering that he is a resident of 1125 South
Jefferson Street, Roanoke, Virginia, U.S.A. were he to personally accomplish and sign the
certification.

We fully agree with petitioner that it was physically impossible for the petition to have been
prepared and sent to the petitioner in the United States, for him to travel from Virginia, U.S.A.
to the nearest Philippine Consulate in Washington, D.C., U.S.A., in order to sign the
certification before the Philippine Consul, and for him to send back the petition to the
Philippines within the 15-day reglementary period. Thus, we find that petitioner has
adequately explained his failure to personally sign the certification which justifies relaxation
of the rule.

We have stressed that the rules on forum shopping, which were precisely designed to
promote and facilitate the orderly administration of justice, should not be interpreted with
such absolute literalness as to subvert its own ultimate and legitimate objective26 which is
simply to prohibit and penalize the evils of forum-shopping.27 The subsequent filing of the
certification duly signed by the petitioner himself should thus be deemed substantial
compliance, pro hac vice.

In like manner, the failure of the petitioner to comply with Section 3, paragraph b, Rule 6 of
the RIRCA, that is, to append to his petition copies of the pleadings and other material
portions of the records as would support the petition, does not justify the outright dismissal of
the petition. It must be emphasized that the RIRCA gives the appellate court a certain leeway
to require parties to submit additional documents as may be necessary in the interest of
substantial justice. Under Section 3, paragraph d of Rule 3 of the RIRCA,28 the CA may
require the parties to complete the annexes as the court deems necessary, and if the petition
is given due course, the CA may require the elevation of a complete record of the case as
provided for under Section 3(d)(5) of Rule 6 of the RIRCA.29 At any rate, petitioner attached
copies of the pleadings and other material portions of the records below with his motion for
reconsideration.30 In Jaro vs. Court of Appeals,31 the Court reiterated the doctrine laid down
in Cusi-Hernandez vs. Diaz32 and Piglas-Kamao vs. National Labor Relations
Commission33 that subsequent submission of the missing documents with the motion for
reconsideration amounts to substantial compliance which calls for the relaxation of the rules
of procedure. We find no cogent reason to depart from this doctrine.

Truly, in dismissing the petition for review, the CA had committed grave abuse of discretion
amounting to lack of jurisdiction in putting a premium on technicalities at the expense of a
just resolution of the case.

Needless to stress, "a litigation is not a game of technicalities."34 When technicality deserts its
function of being an aid to justice, the Court is justified in exempting from its operations a
particular case.35 Technical rules of procedure should be used to promote, not frustrate
justice. While the swift unclogging of court dockets is a laudable objective, granting
substantial justice is an even more urgent ideal.36

The Court’s pronouncement in Republic vs. Court of Appeals37 is worth echoing: "cases
should be determined on the merits, after full opportunity to all parties for ventilation of their
causes and defenses, rather than on technicality or some procedural imperfections. In that
way, the ends of justice would be better served."38 Thus, what should guide judicial action is
that a party litigant is given the fullest opportunity to establish the merits of his action or
defense rather than for him to lose life, honor or property on mere technicalities.39 This
guideline is especially true when the petitioner has satisfactorily explained the lapse and
fulfilled the requirements in his motion for reconsideration,40 as in this case.

In addition, petitioner prays that we decide the present petition on the merits without need of
remanding the case to the CA. He insists that all the elements of unlawful detainer are
present in the case. He further argues that the alleged "priority right to buy the lot they
occupy" does not apply where the landowner does not intend to sell the subject property, as
in the case; that respondents cannot be entitled to protection under P.D. No. 2016 since the
government has no intention of acquiring the subject property, nor is the subject property
located within a zonal improvement area; and, that assuming that there is a negotiation for
the sale of the subject property or a pending case for consignation of rentals, these do not
bar the eviction of respondents.

We are not persuaded. We shall refrain from ruling on the foregoing issues in the present
petition for certiorari. The issues involved are factual issues which inevitably require the
1âwphi 1

weighing of evidence. These are matters that are beyond the province of this Court in a
special civil action for certiorari. These issues are best addressed to the CA in the petition for
review filed before it. As an appellate court, it is empowered to require parties to submit
additional documents, as it may find necessary, or to receive evidence, to promote the ends
of justice, pursuant to the last paragraph of Section 9, B.P. Blg. 129, otherwise known as The
Judiciary Reorganization Act of 1980, to wit:

The Intermediate Appellate Court shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual issues raised in
cases falling within its original and appellate jurisdiction, including the power to grant and
conduct new trials or further proceedings.

WHEREFORE, the petition is PARTLY GRANTED. The Resolutions dated March 21, 1997
and June 23, 1997 of the Court of Appeals in CA-G.R. SP No. 41394 are REVERSED and
SET ASIDE. The case is REMANDED to the Court of Appeals for further proceedings in CA-
G.R. No. 41394, entitled, "Antonio T. Donato vs. Hon. Judge of the Regional Trial Court of
Manila, Branch 47, Filomeno Arcepe, et al."
SO ORDERED.

Puno, (Chairman), Quisumbing, Callejo, Sr., and Tinga, JJ., concur.


G.R. No. 144025 December 27, 2002

SPS. RENE GONZAGA and LERIO GONZAGA, petitioners,


vs.
HON. COURT OF APPEALS, Second Division, Manila,
HON. QUIRICO G. DEFENSOR, Judge, RTC, Branch 36, Sixth Judicial Region, Iloilo
City,
and LUCKY HOMES, INC., represented by WILSON JESENA, JR., as
Manager, respondents.

DECISION

CORONA, J.:

Before this Court is a petition for review on certiorari seeking the reversal of the decision 1 of
the Court of Appeals dated December 29, 1999 and its resolution dated June 1, 2000 in CA-
G.R. SP No. 54587.

The records disclose that, sometime in 1970, petitioner-spouses purchased a parcel of land
from private respondent Lucky Homes, Inc., situated in Iloilo and containing an area of 240
square meters. Said lot was specifically denominated as Lot No. 19 under Transfer
Certificate of Title (TCT) No. 28254 and was mortgaged to the Social Security System (SSS)
as security for their housing loan. Petitioners then started the construction of their house, not
on Lot No. 19 but on Lot No. 18, as private respondent mistakenly identified Lot No. 18 as
Lot No. 19. Upon realizing its error, private respondent, through its general manager,
informed petitioners of such mistake but the latter offered to buy Lot No. 18 in order to widen
their premises. Thus, petitioners continued with the construction of their house. However,
petitioners defaulted in the payment of their housing loan from SSS. Consequently, Lot No.
19 was foreclosed by SSS and petitioners’ certificate of title was cancelled and a new one
was issued in the name of SSS. After Lot No. 19 was foreclosed, petitioners offered to swap
Lot Nos. 18 and 19 and demanded from private respondent that their contract of sale be
reformed and another deed of sale be executed with respect to Lot No. 18, considering that
their house was built therein. However, private respondent refused. This prompted
petitioners to file, on June 13, 1996, an action for reformation of contract and damages with
the Regional Trial Court of Iloilo City, Branch 36, which was docketed as Civil Case No.
17115.

On January 15, 1998, the trial court2 rendered its decision dismissing the complaint for lack
of merit and ordering herein petitioners to pay private respondent the amount of P10,000 as
moral damages and another P10,000 as attorney’s fees. The pertinent conclusion of the trial
court reads as follows:

"Aware of such fact, the plaintiff nonetheless continued to stay in the premises of Lot 18 on
the proposal that he would also buy the same. Plaintiff however failed to buy Lot 18 and
likewise defaulted in the payment of his loan with the SSS involving Lot 19. Consequently Lot
19 was foreclosed and sold at public auction. Thereafter TCT No. T-29950 was cancelled
and in lieu thereof TCT No. T-86612 (Exh. ‘9’) was issued in favor of SSS. This being the
situation obtaining, the reformation of instruments, even if allowed, or the swapping of Lot 18
and Lot 19 as earlier proposed by the plaintiff, is no longer feasible considering that plaintiff
is no longer the owner of Lot 19, otherwise, defendant will be losing Lot 18 without any
substitute therefore (sic). Upon the other hand, plaintiff will be unjustly enriching himself
having in its favor both Lot 19 which was earlier mortgaged by him and subsequently
foreclosed by SSS, as well as Lot 18 where his house is presently standing.

"The logic and common sense of the situation lean heavily in favor of the defendant. It is
evident that what plaintiff had bought from the defendant is Lot 19 covered by TCT No.
28254 which parcel of land has been properly indicated in the instruments and not Lot 18 as
claimed by the plaintiff. The contracts being clear and unmistakable, they reflect the true
intention of the parties, besides the plaintiff failed to assail the contracts on mutual mistake,
hence the same need no longer be reformed."3

On June 22, 1998, a writ of execution was issued by the trial court. Thus, on September 17,
1998, petitioners filed an urgent motion to recall writ of execution, alleging that the court a
quo had no jurisdiction to try the case as it was vested in the Housing and Land Use
Regulatory Board (HLURB) pursuant to PD 957 (The Subdivision and Condominium Buyers
Protective Decree). Conformably, petitioners filed a new complaint against private
respondent with the HLURB. Likewise, on June 30, 1999, petitioner-spouses filed before the
Court of Appeals a petition for annulment of judgment, premised on the ground that the trial
court had no jurisdiction to try and decide Civil Case No. 17115.

In a decision rendered on December 29, 1999, the Court of Appeals denied the petition for
annulment of judgment, relying mainly on the jurisprudential doctrine of estoppel as laid
down in the case of Tijam vs. Sibonghanoy.4

Their subsequent motion for reconsideration having been denied, petitioners filed this instant
petition, contending that the Court of Appeals erred in dismissing the petition by applying the
principle of estoppel, even if the Regional Trial Court, Branch 36 of Iloilo City had no
jurisdiction to decide Civil Case No. 17115.

At the outset, it should be stressed that petitioners are seeking from us the annulment of a
trial court judgment based on lack of jurisdiction. Because it is not an appeal, the correctness
of the judgment is not in issue here. Accordingly, there is no need to delve into the propriety
of the decision rendered by the trial court.

Petitioners claim that the recent decisions of this Court have already abandoned the doctrine
laid down in Tijam vs. Sibonghanoy.5 We do not agree. In countless decisions, this Court has
consistently held that, while an order or decision rendered without jurisdiction is a total nullity
and may be assailed at any stage, active participation in the proceedings in the court which
rendered the order or decision will bar such party from attacking its jurisdiction. As we held in
the leading case of Tijam vs. Sibonghanoy:6

"A party may be estopped or barred from raising a question in different ways and for different
reasons. Thus we speak of estoppel in pais, or estoppel by deed or by record, and of
estoppel by laches.

xxx

"It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative
relief against his opponent and, after obtaining or failing to obtain such relief, repudiate, or
question that same jurisdiction x x x x [T]he question whether the court had jurisdiction either
of the subject matter of the action or of the parties was not important in such cases because
the party is barred from such conduct not because the judgment or order of the court is valid
and conclusive as an adjudication, but for the reason that such a practice can not be
tolerated –– obviously for reasons of public policy."

Tijam has been reiterated in many succeeding cases. Thus, in Orosa vs. Court of
Appeals;7 Ang Ping vs. Court of Appeals;8 Salva vs. Court of Appeals;9 National Steel
Corporation vs. Court of Appeals;10 Province of Bulacan vs. Court of Appeals;11 PNOC
Shipping and Transport Corporation vs. Court of Appeals,12 this Court affirmed the rule that a
party’s active participation in all stages of the case before the trial court, which includes
invoking the court’s authority to grant affirmative relief, effectively estops such party from
later challenging that same court’s jurisdiction.

In the case at bar, it was petitioners themselves who invoked the jurisdiction of the court a
quo by instituting an action for reformation of contract against private respondents. It appears
that, in the proceedings before the trial court, petitioners vigorously asserted their cause from
start to finish. Not even once did petitioners ever raise the issue of the court’s jurisdiction
during the entire proceedings which lasted for two years. It was only after the trial court
rendered its decision and issued a writ of execution against them in 1998 did petitioners first
raise the issue of jurisdiction ─ and it was only because said decision was unfavorable to
them. Petitioners thus effectively waived their right to question the court’s jurisdiction over
the case they themselves filed.

Petitioners should bear the consequence of their act. They cannot be allowed to profit from
their omission to the damage and prejudice of the private respondent. This Court frowns
upon the undesirable practice of a party submitting his case for decision and then accepting
the judgment but only if favorable, and attacking it for lack of jurisdiction if not.13

Public policy dictates that this Court must strongly condemn any double-dealing by parties
who are disposed to trifle with the courts by deliberately taking inconsistent positions, in utter
disregard of the elementary principles of justice and good faith.14 There is no denying that, in
this case, petitioners never raised the issue of jurisdiction throughout the entire proceedings
in the trial court. Instead, they voluntarily and willingly submitted themselves to the
jurisdiction of said court. It is now too late in the day for them to repudiate the jurisdiction
they were invoking all along.

WHEREFORE, the petition for review is hereby DENIED.

SO ORDERED.

Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Morales, JJ., concur.


G.R. No. 124644 February 5, 2004

ARNEL ESCOBAL, petitioner,


vs
HON. FRANCIS GARCHITORENA, Presiding Justice of the Sandiganbayan, Atty.
Luisabel Alfonso-Cortez, Executive Clerk of Court IV of the Sandiganbayan, Hon.
David C. Naval, Presiding Judge of the Regional Trial Court of Naga City, Branch 21,
Luz N. Nueca, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for certiorari with a prayer for the issuance of a temporary restraining order
and preliminary injunction filed by Arnel Escobal seeking the nullification of the remand by
the Presiding Justice of the Sandiganbayan of the records of Criminal Case No. 90-3184 to
the Regional Trial Court (RTC) of Naga City, Branch 21.

The petition at bench arose from the following milieu:

The petitioner is a graduate of the Philippine Military Academy, a member of the


Armed Forces of the Philippines and the Philippine Constabulary, as well as the
Intelligence Group of the Philippine National Police. On March 16, 1990, the
petitioner was conducting surveillance operations on drug trafficking at the Sa
Harong Café Bar and Restaurant located along Barlin St., Naga City. He somehow
got involved in a shooting incident, resulting in the death of one Rodney Rafael N.
Nueca. On February 6, 1991, an amended Information was filed with the RTC of
Naga City, Branch 21, docketed as Criminal Case No. 90-3184 charging the
petitioner and a certain Natividad Bombita, Jr. alias "Jun Bombita" with murder. The
accusatory portion of the amended Information reads:

That on or about March 16, 1990, in the City of Naga, Philippines, and within the
jurisdiction of this Honorable Court by virtue of the Presidential Waiver, dated June 1,
1990, with intent to kill, conspiring and confederating together and mutually helping
each other, did, then and there, willfully, unlawfully and feloniously attack, assault
and maul one Rodney Nueca and accused 2Lt Arnel Escobal armed with a caliber
.45 service pistol shoot said Rodney Nueca thereby inflicting upon him serious,
mortal and fatal wounds which caused his death, and as a consequence thereof,
complainant LUZ N. NUECA, mother of the deceased victim, suffered actual and
compensatory damages in the amount of THREE HUNDRED SIXTY-SEVEN
THOUSAND ONE HUNDRED SEVEN & 95/100 (P367,107.95) PESOS, Philippine
Currency, and moral and exemplary damages in the amount of ONE HUNDRED
THIRTY-FIVE THOUSAND (P135,000.00) PESOS, Philippine Currency.1

On March 19, 1991, the RTC issued an Order preventively suspending the petitioner from
the service under Presidential Decree No. 971, as amended by P.D. No. 1847. When
apprised of the said order, the General Headquarters of the PNP issued on October 6, 1992
Special Order No. 91, preventively suspending the petitioner from the service until the case
was terminated.2

The petitioner was arrested by virtue of a warrant issued by the RTC, while accused Bombita
remained at large. The petitioner posted bail and was granted temporary liberty.
When arraigned on April 9, 1991,3 the petitioner, assisted by counsel, pleaded not guilty to
the offense charged. Thereafter, on December 23, 1991, the petitioner filed a Motion to
Quash4 the Information alleging that as mandated by Commonwealth Act No. 408,5 in
relation to Section 1, Presidential Decree No. 1822 and Section 95 of R.A. No. 6975, the
court martial, not the RTC, had jurisdiction over criminal cases involving PNP members and
officers.

Pending the resolution of the motion, the petitioner on June 25, 1993 requested the Chief of
the PNP for his reinstatement. He alleged that under R.A. No. 6975, his suspension should
last for only 90 days, and, having served the same, he should now be reinstated. On
September 23, 1993,6 the PNP Region V Headquarters wrote Judge David C. Naval
requesting information on whether he issued an order lifting the petitioner’s suspension. The
RTC did not reply. Thus, on February 22, 1994, the petitioner filed a motion in the RTC for
the lifting of the order of suspension. He alleged that he had served the 90-day preventive
suspension and pleaded for compassionate justice. The RTC denied the motion on March 9,
1994.7 Trial thereafter proceeded, and the prosecution rested its case. The petitioner
commenced the presentation of his evidence. On July 20, 1994, he filed a Motion to
Dismiss8the case. Citing Republic of the Philippines v. Asuncion, et al.,9 he argued that since
he committed the crime in the performance of his duties, the Sandiganbayan had exclusive
jurisdiction over the case.

On October 28, 1994, the RTC issued an Order10 denying the motion to dismiss. It, however,
ordered the conduct of a preliminary hearing to determine whether or not the crime charged
was committed by the petitioner in relation to his office as a member of the PNP.

In the preliminary hearing, the prosecution manifested that it was no longer presenting any
evidence in connection with the petitioner’s motion. It reasoned that it had already rested its
case, and that its evidence showed that the petitioner did not commit the offense charged in
connection with the performance of his duties as a member of the Philippine Constabulary.
According to the prosecution, they were able to show the following facts: (a) the petitioner
was not wearing his uniform during the incident; (b) the offense was committed just after
midnight; (c) the petitioner was drunk when the crime was committed; (d) the petitioner was
in the company of civilians; and, (e) the offense was committed in a beerhouse called "Sa
Harong Café Bar and Restaurant."11

For his part, the petitioner testified that at about 10:00 p.m. on March 15, 1990, he was at
the Sa Harong Café Bar and Restaurant at Barlin St., Naga City, to conduct surveillance on
alleged drug trafficking, pursuant to Mission Order No. 03-04 issued by Police
Superintendent Rufo R. Pulido. The petitioner adduced in evidence the sworn statements of
Benjamin Cariño and Roberto Fajardo who corroborated his testimony that he was on a
surveillance mission on the aforestated date.12

On July 31, 1995, the trial court issued an Order declaring that the petitioner committed the
crime charged while not in the performance of his official function. The trial court added that
upon the enactment of R.A. No. 7975,13 the issue had become moot and academic. The
amendatory law transferred the jurisdiction over the offense charged from the
Sandiganbayan to the RTC since the petitioner did not have a salary grade of "27" as
provided for in or by Section 4(a)(1), (3) thereof. The trial court nevertheless ordered the
prosecution to amend the Information pursuant to the ruling in Republic v. Asuncion 14 and
R.A. No. 7975. The amendment consisted in the inclusion therein of an allegation that the
offense charged was not committed by the petitioner in the performance of his
duties/functions, nor in relation to his office.
lawphi1.nêt
The petitioner filed a motion for the reconsideration15 of the said order, reiterating that based
on his testimony and those of Benjamin Cariño and Roberto Fajardo, the offense charged
was committed by him in relation to his official functions. He asserted that the trial court
failed to consider the exceptions to the prohibition. He asserted that R.A. No. 7975, which
was enacted on March 30, 1995, could not be applied retroactively.16

The petitioner further alleged that Luz Nacario Nueca, the mother of the victim, through
counsel, categorically and unequivocably admitted in her complaint filed with the People’s
Law Enforcement Board (PLEB) that he was on an official mission when the crime was
committed.

On November 24, 1995, the RTC made a volte face and issued an Order reversing and
setting aside its July 31, 1995 Order. It declared that based on the petitioner’s evidence, he
was on official mission when the shooting occurred. It concluded that the prosecution failed
to adduce controverting evidence thereto. It likewise considered Luz Nacario Nueca’s
admission in her complaint before the PLEB that the petitioner was on official mission when
the shooting happened.

The RTC ordered the public prosecutor to file a Re-Amended Information and to allege that
the offense charged was committed by the petitioner in the performance of his
duties/functions or in relation to his office; and, conformably to R.A. No. 7975, to thereafter
transmit the same, as well as the complete records with the stenographic notes, to the
Sandiganbayan, to wit:

WHEREFORE, the Order dated July 31, 1995 is hereby SET ASIDE and
RECONSIDERED, and it is hereby declared that after preliminary hearing, this Court
has found that the offense charged in the Information herein was committed by the
accused in his relation to his function and duty as member of the then Philippine
Constabulary.

Conformably with R.A. No. 7975 and the ruling of the Supreme Court in Republic v.
Asuncion, et al., G.R. No. 180208, March 11, 1994:

(1) The City Prosecutor is hereby ordered to file a Re-Amended Information


alleging that the offense charged was committed by the Accused in the
performance of his duties/functions or in relation to his office, within fifteen
(15) days from receipt hereof;

(2) After the filing of the Re-Amended Information, the complete records of
this case, together with the transcripts of the stenographic notes taken during
the entire proceedings herein, are hereby ordered transmitted immediately to
the Honorable Sandiganbayan, through its Clerk of Court, Manila, for
appropriate proceedings.17

On January 8, 1996, the Presiding Justice of the Sandiganbayan ordered the Executive
Clerk of Court IV, Atty. Luisabel Alfonso-Cortez, to return the records of Criminal Case No.
90-3184 to the court of origin, RTC of Naga City, Branch 21. It reasoned that under P.D. No.
1606, as amended by R.A. No. 7975,18 the RTC retained jurisdiction over the case,
considering that the petitioner had a salary grade of "23." Furthermore, the prosecution had
already rested its case and the petitioner had commenced presenting his evidence in the
RTC; following the rule on continuity of jurisdiction, the latter court should continue with the
case and render judgment therein after trial.
Upon the remand of the records, the RTC set the case for trial on May 3, 1996, for the
petitioner to continue presenting his evidence. Instead of adducing his evidence, the
petitioner filed a petition for certiorari, assailing the Order of the Presiding Justice of the
Sandiganbayan remanding the records of the case to the RTC.

The threshold issue for resolution is whether or not the Presiding Justice of the
Sandiganbayan committed a grave abuse of his discretion amounting to excess or lack of
jurisdiction in ordering the remand of the case to the RTC.

The petitioner contends that when the amended information was filed with the RTC on
February 6, 1991, P.D. No. 1606 was still in effect. Under Section 4(a) of the decree, the
Sandiganbayan had exclusive jurisdiction over the case against him as he was charged with
homicide with the imposable penalty of reclusion temporal, and the crime was committed
while in the performance of his duties. He further asserts that although P.D. No. 1606, as
amended by P.D. No. 1861 and by R.A. No. 7975 provides that crimes committed by
members and officers of the PNP with a salary grade below "27" committed in relation to
office are within the exclusive jurisdiction of the proper RTC, the amendment thus introduced
by R.A. No. 7975 should not be applied retroactively. This is so, the petitioner asserts,
because under Section 7 of R.A. No. 7975, only those cases where trial has not begun in the
Sandiganbayan upon the effectivity of the law should be referred to the proper trial court.

The private complainant agrees with the contention of the petitioner. In contrast, the Office of
the Special Prosecutor contends that the Presiding Justice of the Sandiganbayan acted in
accordance with law when he ordered the remand of the case to the RTC. It asserts that
R.A. No. 7975 should be applied retroactively. Although the Sandiganbayan had jurisdiction
over the crime committed by the petitioner when the amended information was filed with the
RTC, by the time it resolved petitioner’s motion to dismiss on July 31, 1995, R.A. No. 7975
had already taken effect. Thus, the law should be given retroactive effect.

The Ruling of the Court

The respondent Presiding Justice acted in accordance with law and the rulings of this Court
when he ordered the remand of the case to the RTC, the court of origin.

The jurisdiction of the court over criminal cases is determined by the allegations in the
Information or the Complaint and the statute in effect at the time of the commencement of
the action, unless such statute provides for a retroactive application thereof. The
jurisdictional requirements must be alleged in the Information.19 Such jurisdiction of the court
acquired at the inception of the case continues until the case is terminated.20

Under Section 4(a) of P.D. No. 1606 as amended by P.D. No. 1861, the Sandiganbayan had
exclusive jurisdiction in all cases involving the following:

(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-
Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2,
Title VII of the Revised Penal Code;

(2) Other offenses or felonies committed by public officers and employees in relation
to their office, including those employed in government-owned or controlled
corporations, whether simple or complexed with other crimes, where the penalty
prescribed by law is higher than prision correccional or imprisonment for six (6)
years, or a fine of P6,000.00 ….21
However, for the Sandiganbayan to have exclusive jurisdiction under the said law over
crimes committed by public officers in relation to their office, it is essential that the facts
showing the intimate relation between the office of the offender and the discharge of official
duties must be alleged in the Information. It is not enough to merely allege in the Information
that the crime charged was committed by the offender in relation to his office because that
would be a conclusion of law.22 The amended Information filed with the RTC against the
petitioner does not contain any allegation showing the intimate relation between his office
and the discharge of his duties. Hence, the RTC had jurisdiction over the offense charged
when on November 24, 1995, it ordered the re-amendment of the Information to include
therein an allegation that the petitioner committed the crime in relation to office. The trial
court erred when it ordered the elevation of the records to the Sandiganbayan. It bears
stressing that R.A. No. 7975 amending P.D. No. 1606 was already in effect and under
Section 2 of the law:

In cases where none of the principal accused are occupying positions corresponding
to salary grade "27" or higher, as prescribed in the said Republic Act No. 6758, or
PNP officers occupying the rank of superintendent or higher, or their equivalent,
exclusive jurisdiction thereof shall be vested in the proper Regional Trial Court,
Metropolitan Trial Court, Municipal Trial Court, and Municipal Circuit Trial Court, as
the case may be, pursuant to their respective jurisdiction as provided in Batas
Pambansa Blg. 129.

Under the law, even if the offender committed the crime charged in relation to his office but
occupies a position corresponding to a salary grade below "27," the proper Regional Trial
Court or Municipal Trial Court, as the case may be, shall have exclusive jurisdiction over the
case. In this case, the petitioner was a Police Senior Inspector, with salary grade "23." He
was charged with homicide punishable by reclusion temporal. Hence, the RTC had exclusive
jurisdiction over the crime charged conformably to Sections 20 and 32 of Batas Pambansa
Blg. 129, as amended by Section 2 of R.A. No. 7691.

The petitioner’s contention that R.A. No. 7975 should not be applied retroactively has no
legal basis. It bears stressing that R.A. No. 7975 is a substantive procedural law which may
be applied retroactively.23

IN LIGHT OF ALL THE FOREGOING, the petition is DISMISSED. No pronouncement as to


costs.

SO ORDERED.
G.R. No. 191894 July 15, 2015

DANILO A. DUNCANO, Petitioner,


vs.
HON. SANDIGANBAYAN (2nd DIVISION), and HON. OFFICE OF THE SPECIAL
PROSECUTOR, Respondents.

DECISION

PERALTA, J.:

This petition for certiorari under Rule 65 of the Rules of Court (Rules) with prayer for
issuance of preliminary injunction and/or temporary restraining order seeks to reverse and
set aside the August 18, 2009 Resolution1 and February 8, 2010 Order2 of respondent
Sandiganbayan Second Division in Criminal Case No. SB-09-CRM-0080, which denied
petitioner's Motion to Dismiss on the ground of la9k of jurisdiction.

The facts are plain and undisputed.

Petitioner Danilo A. Duncano is, at the time material to the case, the Regional Director of the
Bureau of Internal Revenue (BIR) with Salary Grade 26 as classified under Republic Act
(R.A.) No. 6758.3 On March 24, 2009,4 the Office of the Special Prosecutor (OSP), Office of
the Ombudsman, filed a criminal case against him for violation of Section 8, in relation to
Section 11 of R.A. No. 6713,5 allegedly committed as follows:

That on or about April 15, 2003, or sometime prior or subsequent thereto, in Quezon City,
Philippines, and within the jurisdiction of this Honorable Court, accused DANILODUNCANO
y ACIDO, a high ranking public officer, being the Regional Director of Revenue Region No. 7,
of the Bureau of Internal Revenue, Quezon City, and as such is under an obligation to
accomplish and submit declarations under oath of his assets, liabilities and net worth and
financial and business interests, did then and there, wilfully, unlawfully and criminally fail to
disclose in his Sworn Statement of Assets and Liabilities and Networth (SALN) for the year
2002, his financial and business interests/connection in Documail Provides Corporation and
Don Plus Trading of which he and his family are the registered owners thereof, and the 1993
Nissan Patrol motor vehicle registered in the name of his son VINCENT LOUIS P.
DUNCANO which are part of his assets, to the damage and prejudice of public interest.

CONTRARY TO LAW.6

Prior to his arraignment, petitioner filed a Motion to Dismiss With Prayer to Defer the
Issuance of Warrant of Arrest7before respondent Sandiganbayan Second Division. As the
OSP alleged, he admitted that he is a Regional Director with Salary Grade 26. Citing Inding
v. Sandiganbayan8 and Serana v. Sandiganbayan, et al.,9 he asserted that under Presidential
Decree (P.D.) No. 1606, as amended by Section 4 (A) (1) of R.A No. 8249,10 the
Sandiganbayan has no jurisdiction to try and hear the case because he is an official of the
executive branch occupying the position of a Regional Director but with a compensation that
is classified as below Salary Grade 27.

In its Opposition,11 the OSP argued that a reading of Section 4 (A) (1) (a) to (g) of the subject
law would clearly show that the qualification as to Salary Grade 27 and higher applies only to
officials of the executive branch other than the Regional Director and those specifically
enumerated. This is so since the term "Regional Director" and "higher" are separated by the
conjunction "and," which signifies that these two positions are different, apart and distinct,
words but are conjoined together "relating one to the other" to give effect to the purpose of
the law. The fact that the position of Regional Director was specifically mentioned without
indication as to its salary grade signifies the lawmakers’ intention that officials occupying
such position, regardless of salary grade, fall within the original and exclusive jurisdiction of
the Sandiganbayan. This issue, it is claimed, was already resolved in Inding. Finally, the
OSP contended that the filing of the motion to dismiss is premature considering that the
Sandiganbayan has yet to acquire jurisdiction over the person of the accused.

Still not to be outdone, petitioner invoked the applicability of Cuyco v. Sandiganbayan 12 and
Organo v. Sandiganbayan13 in his rejoinder.

On August 18, 2009, the Sandiganbayan Second Division promulgated its Resolution,
disposing: WHEREFORE, in the light of the foregoing, the Court hereby DENIES the instant
Motion to Dismiss for being devoid of merit. Let a Warrant of Arrest be therefore issued
against the accused.

SO ORDERED.14

The respondent court ruled that the position of Regional Director is one of those exceptions
where the Sandiganbayan has jurisdiction even if such position is not Salary Grade 27. It
was opined that Section 4 (A) (1) of R.A No. 8249 unequivocally provides that respondent
court has jurisdiction over officials of the executive branch of the government occupying the
position of regional director and higher, otherwise classified as Salary Grade 27 and higher,
of R.A. No. 6758, including those officials who are expressly enumerated in subparagraphs
(a) to (g). In support of the ruling, this Court’s pronouncements in Indingand Binay v.
Sandiganbayan15 were cited.

Petitioner filed a Motion for Reconsideration, but it was denied;16 Hence, this petition.

Instead of issuing a temporary restraining order or writ of preliminary injunction, the Court
required respondents to file a comment on the petition without necessarily giving due course
thereto.17 Upon compliance of the OSP, a Rejoinder (supposedly a Reply) was filed by
petitioner.

At the heart of the controversy is the determination of whether, according to P.D. No. 1606,
as amended by Section 4 (A) (1) of R.A No. 8249, only Regional Directors with Salary Grade
of 27 and higher, as classified under R.A. No. 6758, fall within the exclusive jurisdiction of the
Sandiganbayan. Arguing that he is not included among the public officials specifically
enumerated in Section 4 (A) (1) (a) to (g) of the law and heavily relying as well on Cuyco,
petitioner insists that respondent court lacks jurisdiction over him, who is merely a Regional
Director with Salary Grade 26. On the contrary, the OSP maintains that a Regional Director,
irrespective of salary grade, falls within the exclusive original jurisdiction of the
Sandiganbayan. We find merit in the petition.

The creation of the Sandiganbayan was mandated by Section 5, Article XIII of the 1973
Constitution.18 By virtue of the powers vested in him by the Constitution and pursuant to
Proclamation No. 1081, dated September 21, 1972, former President Ferdinand E. Marcos
issued P.D. No. 1486.19 The decree was later amended by P.D. No. 1606,20Section 20 of
Batas Pambansa Blg. 129,21 P.D. No. 1860,22 and P.D. No. 1861.23
With the advent of the 1987 Constitution, the special court was retained as provided for in
Section 4, Article XI thereof.24 Aside from Executive Order Nos. 1425 and 14-a,26 and R.A.
7080,27 which expanded the jurisdiction of the Sandiganbayan, P.D. No. 1606 was further
modified by R.A. No. 7975,28 R.A. No. 8249,29 and just this year, R.A. No. 10660.30

For the purpose of this case, the relevant provision is Section 4 of R.A. No. 8249, which
states: SEC. 4. Section 4 of the same decree is hereby further amended to read as follows:

"SEC. 4. Jurisdiction.– The Sandiganbayan shall exercise exclusive original jurisdiction in all
cases involving:

"A. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and
Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of
the Revised Penal Code, where one or more of the accused are officials occupying the
following positions in the government, whether in a permanent, acting or interim capacity, at
the time of the commission of the offense:

"(1) Officials of the executive branch occupying the positions of regional director and higher,
otherwise classified as Grade ‘27’ and higher, of the Compensation and Position
Classification Act of 1989 (Republic Act No. 6758), specifically including:

"(a) Provincial governors, vice-governors, members of the sangguniang


panlalawigan, and provincial treasurers, assessors, engineers, and other provincial
department heads;

"(b) City mayor, vice-mayors, members of the sangguniang panlungsod, city


treasurers, assessors, engineers, and other city department heads;

"(c) Officials of the diplomatic service occupying the position of consul and higher;

"(d) Philippine army and air force colonels, naval captains, and all officers of higher
rank;

"(e) Officers of the Philippine National Police while occupying the position of
provincial director and those holding the rank of senior superintendent or higher;

"(f) City and provincial prosecutors and their assistants, and officials and prosecutors
in the Office of the Ombudsman and special prosecutor;

"(g) Presidents, directors or trustees, or managers of government-owned or


controlled corporations, state universities or educational institutions or foundations.

"(2) Members of Congress and officials thereof classified as Grade ‘27’ and up under
the Compensation and Position Classification Act of 1989;

"(3) Members of the judiciary without prejudice to the provisions of the Constitution;

"(4) Chairmen and members of Constitutional Commission, without prejudice to the


provisions of the Constitution; and
"(5) All other national and local officials classified as Grade ‘27’ and higher under the
Compensation and Position Classification Act of 1989.

"B. Other offenses or felonies whether simple or complexed with other crimes committed by
the public officials and employees mentioned in subsection a of this section in relation to
their office.

"C. Civil and criminal cases filed pursuant to and in connection with Executive Order Nos. 1,
2, 14 and 14-A, issued in 1986.

x x x"

Based on the afore-quoted, those that fall within the original jurisdiction of the
Sandiganbayan are: (1) officials of the executive branch with Salary Grade 27 or higher, and
(2) officials specifically enumerated in Section 4 (A) (1) (a) to (g), regardless of their salary
grades.31 While the first part of Section 4 (A) covers only officials of the executive branch with
Salary Grade 27 and higher, its second part specifically includes other executive officials
whose positions may not be of Salary Grade 27 and higher but who are by express provision
of law placed under the jurisdiction of the Sandiganbayan.32

That the phrase "otherwise classified as Grade ‘27’ and higher" qualifies "regional director
and higher" is apparent from the Sponsorship Speech of Senator Raul S. Roco on Senate
Bill Nos. 1353and 844, which eventually became R.A. Nos. 7975 and 8249, respectively:

As proposed by the Committee, the Sandiganbayan shall exercise original jurisdiction over
the cases assigned to it only in instances where one or more of the principal accused are
officials occupying the positions of regional director and higher or are otherwise classified as
Grade 27 and higher by the Compensation and Position Classification Act of 1989, whether
in a permanent, acting or interim capacity at the time of the commission of the offense. The
jurisdiction, therefore, refers to a certain grade upwards, which shall remain with the
Sandiganbayan.33 (Emphasis supplied)

To speed up trial in the Sandiganbayan, Republic Act No. 7975 was enacted for that Court to
concentrate on the "larger fish" and leave the "small fry" to the lower courts. This law
became effective on May 6, 1995 and it provided a two-pronged solution to the clogging of
the dockets of that court, to wit:

It divested the Sandiganbayan of jurisdiction over public officials whose salary grades were
at Grade "26" or lower, devolving thereby these cases to the lower courts, and retaining the
jurisdiction of the Sandiganbayan only over public officials whose salary grades were at
Grade "27" or higher and over other specific public officials holding important positions in
government regardless of salary grade; x x x34 (Emphasis supplied)

The legislative intent is to allow the Sandiganbayan to devote its time and expertise to big-
time cases involving the so-called "big fishes" in the government rather than those accused
who are of limited means who stand trial for "petty crimes," the so-called "small fry," which, in
turn, helps the court decongest its dockets.35

Yet, those that are classified as Salary Grade 26 and below may still fall within the
jurisdiction of the Sandiganbayan, provided that they hold the positions enumerated by the
law.36 In this category, it is the position held, not the salary grade, which determines the
jurisdiction of the Sandiganbayan.37 The specific inclusion constitutes an exception to the
general qualification relating to "officials of the executive branch occupying the positions of
regional director and higher, otherwise classified as Grade ‘27’ and higher, of the
Compensation and Position Classification Act of 1989."38 As ruled in Inding:

Following this disquisition, the paragraph of Section 4 which provides that if the accused is
occupying a position lower than SG 27, the proper trial court has jurisdiction, can only be
properly interpreted as applying to those cases where the principal accused is occupying a
position lower than SG 27 and not among those specifically included in the enumeration in
Section 4 a. (1) (a) to (g). Stated otherwise, except for those officials specifically included in
Section 4 a. (1) (a) to (g), regardless of their salary grades, over whom the Sandiganbayan
has jurisdiction, all other public officials below SG 27 shall be under the jurisdiction of the
proper trial courts "where none of the principal accused are occupying positions
corresponding to SG 27 or higher." By this construction, the entire Section 4 is given effect.
The cardinal rule, after all, in statutory construction is that the particular words, clauses and
phrases should not be studied as detached and isolated expressions, but the whole and
every part of the statute must be considered in fixing the meaning of any of its parts and in
order to produce a harmonious whole. And courts should adopt a construction that will give
effect to every part of a statute, if at all possible. Ut magis valeat quam pereat or that
construction is to be sought which gives effect to the whole of the statute – its every word.39

Thus, to cite a few, We have held that a member of the Sangguniang Panlungsod,40 a
department manager of the Philippine Health Insurance Corporation (Philhealth),41 a student
regent of the University of the Philippines,42 and a Head of the Legal Department and Chief of
the Documentation with corresponding ranks of Vice-Presidents and Assistant Vice-
President of the Armed Forces of the Philippines Retirement and Separation Benefits
System (AFP-RSBS)43 fall within the jurisdiction of the Sandiganbayan.

Petitioner is not an executive official with Salary Grade 27 or higher. Neither does he hold
any position particularly enumerated in Section 4 (A) (1) (a) to (g). As he correctly argues, his
case is, in fact, on all fours with Cuyco. Therein, the accused was the Regional Director of
1avv phi 1

the Land Transportation Office, Region IX, Zamboanga City, but at the time of the
commission of the crime in 1992, his position was classified as Director II with Salary Grade
26.44It was opined: Petitioner contends that at the time of the commission of the offense in
1992, he was occupying the position of Director II, Salary Grade 26, hence, jurisdiction over
the cases falls with the Regional Trial Court.

We sustain petitioner's contention.

The Sandiganbayan has no jurisdiction over violations of Section 3(a) and (e), Republic Act
No. 3019, as amended, unless committed by public officials and employees occupying
positions of regional director and higher with Salary Grade "27" or higher, under the
Compensation and Position Classification Act of 1989 (Republic Act No. 6758) in relation to
their office.

In ruling in favor of its jurisdiction, even though petitioner admittedly occupied the position of
Director II with Salary Grade "26" under the Compensation and Position Classification Act of
1989 (Republic Act No. 6758), the Sandiganbayan incurred in serious error of jurisdiction,
and acted with grave abuse of discretion amounting to lack of jurisdiction in suspending
petitioner from office, entitling petitioner to the reliefs prayed for.45
In the same way, a certification issued by the OIC – Assistant Chief, Personnel Division of
the BIR shows that, although petitioner is a Regional Director of the BIR, his position is
classified as Director II with Salary Grade 26.46

There is no merit in the OSP’s allegation that the petition was prematurely filed on the
ground that respondent court has not yet acquired jurisdiction over the person of petitioner.
Records disclose that when a warrant of arrest was issued by respondent court, petitioner
voluntarily surrendered and posted a cash bond on September 17, 2009.Also, he was
arraigned on April 14, 2010,prior to the filing of the petition on April 30, 2010.

WHEREFORE, the foregoing considered, the instant petition for certiorari is GRANTED. The
August 18, 2009 Resolution and February 8, 2010 Order of the Sandiganbayan Second
Division, which denied petitioner's Motion to Dismiss on the ground of lack of jurisdiction, are
REVERSED AND SET ASIDE.

SO ORDERED.
G.R. No. 155001 May 5, 2003

DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA,


MANUEL ANTONIO B. BOÑE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V.
DOMALAON, CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO,
BIENVENIDO C. HILARIO, MIASCOR WORKERS UNION - NATIONAL LABOR UNION
(MWU-NLU), and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION
(PALEA), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL
AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA, in his capacity as
Head of the Department of Transportation and Communications, respondents,
MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS
CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES
AIRPORT SERVICES CORPORATION, MIASCOR CATERING SERVICES
CORPORATION, MIASCOR AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR
LOGISTICS CORPORATION, petitioners-in-intervention,

x---------------------------------------------------------x

G.R. No. 155547 May 5, 2003

SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G.


JARAULA, petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL
AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS,
SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of
Transportation and Communications, and SECRETARY SIMEON A. DATUMANONG, in
his capacity as Head of the Department of Public Works and Highways, respondents,
JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON
VILLARAMA, PROSPERO C. NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST
ABAYON, and BENASING O. MACARANBON, respondents-intervenors,

x---------------------------------------------------------x

G.R. No. 155661 May 5, 2003

CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V.


GAERLAN, LEONARDO DE LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD
SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and SAMAHANG
MANGGAGAWA SA PALIPARAN NG PILIPINAS (SMPP), petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL
AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of
the Department of Transportation and Communications, respondents.
PUNO, J.:

Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule
65 of the Revised Rules of Court seeking to prohibit the Manila International Airport Authority
(MIAA) and the Department of Transportation and Communications (DOTC) and its
Secretary from implementing the following agreements executed by the Philippine
Government through the DOTC and the MIAA and the Philippine International Air Terminals
Co., Inc. (PIATCO): (1) the Concession Agreement signed on July 12, 1997, (2) the
Amended and Restated Concession Agreement dated November 26, 1999, (3) the First
Supplement to the Amended and Restated Concession Agreement dated August 27, 1999,
(4) the Second Supplement to the Amended and Restated Concession Agreement dated
September 4, 2000, and (5) the Third Supplement to the Amended and Restated Concession
Agreement dated June 22, 2001 (collectively, the PIATCO Contracts).

The facts are as follows:

In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to
conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) and
determine whether the present airport can cope with the traffic development up to the
year 2010. The study consisted of two parts: first, traffic forecasts, capacity of
existing facilities, NAIA future requirements, proposed master plans and
development plans; and second, presentation of the preliminary design of the
passenger terminal building. The ADP submitted a Draft Final Report to the DOTC in
December 1989.

Some time in 1993, six business leaders consisting of John Gokongwei, Andrew
Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with
then President Fidel V. Ramos to explore the possibility of investing in the
construction and operation of a new international airport terminal. To signify their
commitment to pursue the project, they formed the Asia's Emerging Dragon Corp.
(AEDC) which was registered with the Securities and Exchange Commission (SEC)
on September 15, 1993.

On October 5, 1994, AEDC submitted an unsolicited proposal to the Government


through the DOTC/MIAA for the development of NAIA International Passenger
Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant
to RA 6957 as amended by RA 7718 (BOT Law).1

On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the
Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT
III project.

On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to
the National Economic and Development Authority (NEDA). A revised proposal, however,
was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the
NEDA Investment Coordinating Council (NEDA ICC) – Technical Board favorably endorsed
the project to the ICC – Cabinet Committee which approved the same, subject to certain
conditions, on January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution
No. 2 which approved the NAIA IPT III project.

On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of
an invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in
accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to
submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first
envelope should contain the Prequalification Documents, the second envelope the Technical
Proposal, and the third envelope the Financial Proposal of the proponent.

On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid
Documents and the submission of the comparative bid proposals. Interested firms were
permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon
submission of a written application and payment of a non-refundable fee of P50,000.00
(US$2,000).

The Bid Documents issued by the PBAC provided among others that the proponent must
have adequate capability to sustain the financing requirement for the detailed engineering,
design, construction, operation, and maintenance phases of the project. The proponent
would be evaluated based on its ability to provide a minimum amount of equity to the project,
and its capacity to secure external financing for the project.

On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid
conference on July 29, 1996.

On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents.
The following amendments were made on the Bid Documents:

a. Aside from the fixed Annual Guaranteed Payment, the proponent shall include in
its financial proposal an additional percentage of gross revenue share of the
Government, as follows:

i. First 5 years 5.0%


ii. Next 10 years 7.5%
iii. Next 10 years 10.0%

b. The amount of the fixed Annual Guaranteed Payment shall be subject of the price
challenge. Proponent may offer an Annual Guaranteed Payment which need not be
of equal amount, but payment of which shall start upon site possession.

c. The project proponent must have adequate capability to sustain the financing
requirement for the detailed engineering, design, construction, and/or operation and
maintenance phases of the project as the case may be. For purposes of pre-
qualification, this capability shall be measured in terms of:

i. Proof of the availability of the project proponent and/or the consortium to


provide the minimum amount of equity for the project; and

ii. a letter testimonial from reputable banks attesting that the project
proponent and/or the members of the consortium are banking with them, that
the project proponent and/or the members are of good financial standing, and
have adequate resources.

d. The basis for the prequalification shall be the proponent's compliance with the
minimum technical and financial requirements provided in the Bid Documents and
the IRR of the BOT Law. The minimum amount of equity shall be 30% of the Project
Cost.

e. Amendments to the draft Concession Agreement shall be issued from time to time.
Said amendments shall only cover items that would not materially affect the
preparation of the proponent's proposal.

On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications
were made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co.,
Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing
Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment
submitted by the challengers would be revealed to AEDC, and that the challengers' technical
and financial proposals would remain confidential. The PBAC also clarified that the list of
revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and
that other revenue sources may be included by the proponent, subject to approval by
DOTC/MIAA. Furthermore, the PBAC clarified that only those fees and charges denominated
as Public Utility Fees would be subject to regulation, and those charges which would be
actually deemed Public Utility Fees could still be revised, depending on the outcome of
PBAC's query on the matter with the Department of Justice.

In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of
PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the
PBAC's responses were as follows:

1. It is difficult for Paircargo and Associates to meet the required minimum equity
requirement as prescribed in Section 8.3.4 of the Bid Documents considering that the
capitalization of each member company is so structured to meet the requirements
and needs of their current respective business undertaking/activities. In order to
comply with this equity requirement, Paircargo is requesting PBAC to just allow each
member of (sic) corporation of the Joint Venture to just execute an agreement that
embodies a commitment to infuse the required capital in case the project is awarded
to the Joint Venture instead of increasing each corporation's current authorized
capital stock just for prequalification purposes.

In prequalification, the agency is interested in one's financial capability at the time of


prequalification, not future or potential capability.

A commitment to put up equity once awarded the project is not enough to establish
that "present" financial capability. However, total financial capability of all member
companies of the Consortium, to be established by submitting the respective
companies' audited financial statements, shall be acceptable.

2. At present, Paircargo is negotiating with banks and other institutions for the
extension of a Performance Security to the joint venture in the event that the
Concessions Agreement (sic) is awarded to them. However, Paircargo is being
required to submit a copy of the draft concession as one of the documentary
requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy
of the approved negotiated agreement between the PBAC and the AEDC at the
soonest possible time.
A copy of the draft Concession Agreement is included in the Bid Documents. Any
material changes would be made known to prospective challengers through bid
bulletins. However, a final version will be issued before the award of contract.

The PBAC also stated that it would require AEDC to sign Supplement C of the Bid
Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the
same with the required Bid Security.

On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing
Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp.
(Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to
the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the
prequalification documents of the Paircargo Consortium. On the following day, September
24, 1996, the PBAC prequalified the Paircargo Consortium.

On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards
the Paircargo Consortium, which include:

a. The lack of corporate approvals and financial capability of PAIRCARGO;

b. The lack of corporate approvals and financial capability of PAGS;

c. The prohibition imposed by RA 337, as amended (the General Banking Act) on the
amount that Security Bank could legally invest in the project;

d. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for


prequalification purposes; and

e. The appointment of Lufthansa as the facility operator, in view of the Philippine


requirement in the operation of a public utility.

The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the
issues raised by the latter, and that based on the documents submitted by Paircargo and the
established prequalification criteria, the PBAC had found that the challenger, Paircargo, had
prequalified to undertake the project. The Secretary of the DOTC approved the finding of the
PBAC.

The PBAC then proceeded with the opening of the second envelope of the Paircargo
Consortium which contained its Technical Proposal.

On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's
financial capability, in view of the restrictions imposed by Section 21-B of the General
Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other
Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and
requested that it be furnished with excerpts of the PBAC meeting and the accompanying
technical evaluation report where each of the issues they raised were addressed.

On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the
Paircargo Consortium containing their respective financial proposals. Both proponents
offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the
government and to pay the government: 5% share in gross revenues for the first five years of
operation, 7.5% share in gross revenues for the next ten years of operation, and 10% share
in gross revenues for the last ten years of operation, in accordance with the Bid Documents.
However, in addition to the foregoing, AEDC offered to pay the government a total of P135
million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the
government a total of P17.75 billion for the same period.

Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted
by the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996
within which to match the said bid, otherwise, the project would be awarded to Paircargo.

As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary
Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium
regarding AEDC's failure to match the proposal.

On February 27, 1997, Paircargo Consortium incorporated into Philippine International


Airport Terminals Co., Inc. (PIATCO).

AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated
its objections as regards the prequalification of PIATCO.

On April 11, 1997, the DOTC submitted the concession agreement for the second-pass
approval of the NEDA-ICC.

On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for
Declaration of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of
the DOTC, the Chairman of the PBAC, the voting members of the PBAC and Pantaleon D.
Alvarez, in his capacity as Chairman of the PBAC Technical Committee.

On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on
a no-objection basis, of the BOT agreement between the DOTC and PIATCO. As the ad
referendum gathered only four (4) of the required six (6) signatures, the NEDA merely noted
the agreement.

On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO.

On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and
PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the
Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport
Passenger Terminal III" (1997 Concession Agreement). The Government granted PIATCO
the franchise to operate and maintain the said terminal during the concession period and to
collect the fees, rentals and other charges in accordance with the rates or schedules
stipulated in the 1997 Concession Agreement. The Agreement provided that the concession
period shall be for twenty-five (25) years commencing from the in-service date, and may be
renewed at the option of the Government for a period not exceeding twenty-five (25) years.
At the end of the concession period, PIATCO shall transfer the development facility to MIAA.

On November 26, 1998, the Government and PIATCO signed an Amended and Restated
Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement
that were amended by the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of
completion"; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing
with the exclusivity of the franchise given to the Concessionaire; Sec. 4.04 concerning the
assignment by Concessionaire of its interest in the Development Facility; Sec. 5.08 (c)
dealing with the proceeds of Concessionaire's insurance; Sec. 5.10 with respect to the
temporary take-over of operations by GRP; Sec. 5.16 pertaining to the taxes, duties and
other imposts that may be levied on the Concessionaire; Sec. 6.03 as regards the periodic
adjustment of public utility fees and charges; the entire Article VIII concerning the provisions
on the termination of the contract; and Sec. 10.02 providing for the venue of the arbitration
proceedings in case a dispute or controversy arises between the parties to the agreement.

Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The
First Supplement was signed on August 27, 1999; the Second Supplement on September 4,
2000; and the Third Supplement on June 22, 2001 (collectively, Supplements).

The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or
"Gross Revenues"; Sec. 2.05 (d) of the ARCA referring to the obligation of MIAA to provide
sufficient funds for the upkeep, maintenance, repair and/or replacement of all airport facilities
and equipment which are owned or operated by MIAA; and further providing additional
special obligations on the part of GRP aside from those already enumerated in Sec. 2.05 of
the ARCA. The First Supplement also provided a stipulation as regards the construction of a
surface road to connect NAIA Terminal II and Terminal III in lieu of the proposed access
tunnel crossing Runway 13/31; the swapping of obligations between GRP and PIATCO
regarding the improvement of Sales Road; and the changes in the timetable. It also
amended Sec. 6.01 (c) of the ARCA pertaining to the Disposition of Terminal Fees; Sec. 6.02
of the ARCA by inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA
referring to the Payments of Percentage Share in Gross Revenues.

The Second Supplement to the ARCA contained provisions concerning the clearing,
removal, demolition or disposal of subterranean structures uncovered or discovered at the
site of the construction of the terminal by the Concessionaire. It defined the scope of works; it
provided for the procedure for the demolition of the said structures and the consideration for
the same which the GRP shall pay PIATCO; it provided for time extensions, incremental and
consequential costs and losses consequent to the existence of such structures; and it
provided for some additional obligations on the part of PIATCO as regards the said
structures.

Finally, the Third Supplement provided for the obligations of the Concessionaire as regards
the construction of the surface road connecting Terminals II and III.

Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA
Terminals I and II, had existing concession contracts with various service providers to offer
international airline airport services, such as in-flight catering, passenger handling, ramp and
ground support, aircraft maintenance and provisions, cargo handling and warehousing, and
other services, to several international airlines at the NAIA. Some of these service providers
are the Miascor Group, DNATA-Wings Aviation Systems Corp., and the MacroAsia Group.
Miascor, DNATA and MacroAsia, together with Philippine Airlines (PAL), are the dominant
players in the industry with an aggregate market share of 70%.

On September 17, 2002, the workers of the international airline service providers, claiming
that they stand to lose their employment upon the implementation of the questioned
agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said
agreements.2

On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed
a motion for intervention and a petition-in-intervention.
On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino
Jaraula filed a similar petition with this Court.3

On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the
legality of the various agreements.4

On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P.
Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay,
Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as
Respondents-Intervenors. They filed their Comment-In-Intervention defending the validity of
the assailed agreements and praying for the dismissal of the petitions.

During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on
November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacañang
Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's
legal offices have concluded (as) null and void."5

Respondent PIATCO filed its Comments to the present petitions on November 7 and 27,
2002. The Office of the Solicitor General and the Office of the Government Corporate
Counsel filed their respective Comments in behalf of the public respondents.

On December 10, 2002, the Court heard the case on oral argument. After the oral argument,
the Court then resolved in open court to require the parties to file simultaneously their
respective Memoranda in amplification of the issues heard in the oral arguments within 30
days and to explore the possibility of arbitration or mediation as provided in the challenged
contracts.

In their consolidated Memorandum, the Office of the Solicitor General and the Office of the
Government Corporate Counsel prayed that the present petitions be given due course and
that judgment be rendered declaring the 1997 Concession Agreement, the ARCA and the
Supplements thereto void for being contrary to the Constitution, the BOT Law and its
Implementing Rules and Regulations.

On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO
commenced arbitration proceedings before the International Chamber of Commerce,
International Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat
of the ICC against the Government of the Republic of the Philippines acting through the
DOTC and MIAA.

In the present cases, the Court is again faced with the task of resolving complicated issues
made difficult by their intersecting legal and economic implications. The Court is aware of the
far reaching fall out effects of the ruling which it makes today. For more than a century and
whenever the exigencies of the times demand it, this Court has never shirked from its
solemn duty to dispense justice and resolve "actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been grave
abuse of discretion amounting to lack or excess of jurisdiction."6 To be sure, this Court will
not begin to do otherwise today.

We shall first dispose of the procedural issues raised by respondent PIATCO which they
allege will bar the resolution of the instant controversy.

Petitioners' Legal Standing to File


the present Petitions

a. G.R. Nos. 155001 and 155661

In G.R. No. 155001 individual petitioners are employees of various service providers7 having
separate concession contracts with MIAA and continuing service agreements with various
international airlines to provide in-flight catering, passenger handling, ramp and ground
support, aircraft maintenance and provisions, cargo handling and warehousing and other
services. Also included as petitioners are labor unions MIASCOR Workers Union-National
Labor Union and Philippine Airlines Employees Association. These petitioners filed the
instant action for prohibition as taxpayers and as parties whose rights and interests stand to
be violated by the implementation of the PIATCO Contracts.

Petitioners-Intervenors in the same case are all corporations organized and existing under
Philippine laws engaged in the business of providing in-flight catering, passenger handling,
ramp and ground support, aircraft maintenance and provisions, cargo handling and
warehousing and other services to several international airlines at the Ninoy Aquino
International Airport. Petitioners-Intervenors allege that as tax-paying international airline and
airport-related service operators, each one of them stands to be irreparably injured by the
implementation of the PIATCO Contracts. Each of the petitioners-intervenors have separate
and subsisting concession agreements with MIAA and with various international airlines
which they allege are being interfered with and violated by respondent PIATCO.

In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa
sa Paliparan ng Pilipinas - a legitimate labor union and accredited as the sole and exclusive
bargaining agent of all the employees in MIAA. Petitioners anchor their petition for prohibition
on the nullity of the contracts entered into by the Government and PIATCO regarding the
build-operate-and-transfer of the NAIA IPT III. They filed the petition as taxpayers and
persons who have a legitimate interest to protect in the implementation of the PIATCO
Contracts.

Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations
which directly contravene numerous provisions of the Constitution, specific provisions of the
BOT Law and its Implementing Rules and Regulations, and public policy. Petitioners contend
that the DOTC and the MIAA, by entering into said contracts, have committed grave abuse of
discretion amounting to lack or excess of jurisdiction which can be remedied only by a writ of
prohibition, there being no plain, speedy or adequate remedy in the ordinary course of law.

In particular, petitioners assail the provisions in the 1997 Concession Agreement and the
ARCA which grant PIATCO the exclusive right to operate a commercial international
passenger terminal within the Island of Luzon, except those international airports already
existing at the time of the execution of the agreement. The contracts further provide that
upon the commencement of operations at the NAIA IPT III, the Government shall cause the
closure of Ninoy Aquino International Airport Passenger Terminals I and II as international
passenger terminals. With respect to existing concession agreements between MIAA and
international airport service providers regarding certain services or operations, the 1997
Concession Agreement and the ARCA uniformly provide that such services or operations will
not be carried over to the NAIA IPT III and PIATCO is under no obligation to permit such
carry over except through a separate agreement duly entered into with PIATCO.8

With respect to the petitioning service providers and their employees, upon the
commencement of operations of the NAIA IPT III, they allege that they will be effectively
barred from providing international airline airport services at the NAIA Terminals I and II as
all international airlines and passengers will be diverted to the NAIA IPT III. The petitioning
service providers will thus be compelled to contract with PIATCO alone for such services,
with no assurance that subsisting contracts with MIAA and other international airlines will be
respected. Petitioning service providers stress that despite the very competitive market, the
substantial capital investments required and the high rate of fees, they entered into their
respective contracts with the MIAA with the understanding that the said contracts will be in
force for the stipulated period, and thereafter, renewed so as to allow each of the petitioning
service providers to recoup their investments and obtain a reasonable return thereon.

Petitioning employees of various service providers at the NAIA Terminals I and II and of
MIAA on the other hand allege that with the closure of the NAIA Terminals I and II as
international passenger terminals under the PIATCO Contracts, they stand to lose
employment.

The question on legal standing is whether such parties have "alleged such a personal stake
in the outcome of the controversy as to assure that concrete adverseness which sharpens
the presentation of issues upon which the court so largely depends for illumination of difficult
constitutional questions."9 Accordingly, it has been held that the interest of a person assailing
the constitutionality of a statute must be direct and personal. He must be able to show, not
only that the law or any government act is invalid, but also that he sustained or is in imminent
danger of sustaining some direct injury as a result of its enforcement, and not merely that he
suffers thereby in some indefinite way. It must appear that the person complaining has been
or is about to be denied some right or privilege to which he is lawfully entitled or that he is
about to be subjected to some burdens or penalties by reason of the statute or act
complained of.10

We hold that petitioners have the requisite standing. In the above-mentioned cases,
petitioners have a direct and substantial interest to protect by reason of the implementation
of the PIATCO Contracts. They stand to lose their source of livelihood, a property right which
is zealously protected by the Constitution. Moreover, subsisting concession agreements
between MIAA and petitioners-intervenors and service contracts between international
airlines and petitioners-intervenors stand to be nullified or terminated by the operation of the
NAIA IPT III under the PIATCO Contracts. The financial prejudice brought about by the
PIATCO Contracts on petitioners and petitioners-intervenors in these cases are legitimate
interests sufficient to confer on them the requisite standing to file the instant petitions.

b. G.R. No. 155547

In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of
Representatives, citizens and taxpayers. They allege that as members of the House of
Representatives, they are especially interested in the PIATCO Contracts, because the
contracts compel the Government and/or the House of Representatives to appropriate funds
necessary to comply with the provisions therein.11 They cite provisions of the PIATCO
Contracts which require disbursement of unappropriated amounts in compliance with the
contractual obligations of the Government. They allege that the Government obligations in
the PIATCO Contracts which compel government expenditure without appropriation is a
curtailment of their prerogatives as legislators, contrary to the mandate of the Constitution
that "[n]o money shall be paid out of the treasury except in pursuance of an appropriation
made by law."12
Standing is a peculiar concept in constitutional law because in some cases, suits are not
brought by parties who have been personally injured by the operation of a law or any other
government act but by concerned citizens, taxpayers or voters who actually sue in the public
interest. Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of
Imus13 and Gonzales v. Raquiza14 wherein this Court held that appropriation must be made
only on amounts immediately demandable, public interest demands that we take a more
liberal view in determining whether the petitioners suing as legislators, taxpayers and
citizens have locus standi to file the instant petition. In Kilosbayan, Inc. v.
Guingona,15 this Court held "[i]n line with the liberal policy of this Court on locus
standi, ordinary taxpayers, members of Congress, and even association of planters, and
non-profit civic organizations were allowed to initiate and prosecute actions before this Court
to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of
various government agencies or instrumentalities."16 Further, "insofar as taxpayers' suits are
concerned . . . (this Court) is not devoid of discretion as to whether or not it should be
entertained."17 As such ". . . even if, strictly speaking, they [the petitioners] are not covered
by the definition, it is still within the wide discretion of the Court to waive the requirement and
so remove the impediment to its addressing and resolving the serious constitutional
questions raised."18 In view of the serious legal questions involved and their impact on public
interest, we resolve to grant standing to the petitioners.

Other Procedural Matters

Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant
cases as factual issues are involved which this Court is ill-equipped to resolve. Moreover,
PIATCO alleges that submission of this controversy to this Court at the first instance is a
violation of the rule on hierarchy of courts. They contend that trial courts have concurrent
jurisdiction with this Court with respect to a special civil action for prohibition and hence,
following the rule on hierarchy of courts, resort must first be had before the trial courts.

After a thorough study and careful evaluation of the issues involved, this Court is of the view
that the crux of the instant controversy involves significant legal questions. The facts
necessary to resolve these legal questions are well established and, hence, need not be
determined by a trial court.

The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction
over the cases at bar. The said rule may be relaxed when the redress desired cannot be
obtained in the appropriate courts or where exceptional and compelling circumstances justify
availment of a remedy within and calling for the exercise of this Court's primary jurisdiction.19

It is easy to discern that exceptional circumstances exist in the cases at bar that call for
the relaxation of the rule. Both petitioners and respondents agree that these cases are
of transcendental importance as they involve the construction and operation of the
country's premier international airport. Moreover, the crucial issues submitted for resolution
are of first impression and they entail the proper legal interpretation of key provisions of the
Constitution, the BOT Law and its Implementing Rules and Regulations. Thus, considering
the nature of the controversy before the Court, procedural bars may be lowered to give way
for the speedy disposition of the instant cases.

Legal Effect of the Commencement

of Arbitration Proceedings by
PIATCO

There is one more procedural obstacle which must be overcome. The Court is aware that
arbitration proceedings pursuant to Section 10.02 of the ARCA have been filed at the
instance of respondent PIATCO. Again, we hold that the arbitration step taken by PIATCO
will not oust this Court of its jurisdiction over the cases at bar.

In Del Monte Corporation-USA v. Court of Appeals,20 even after finding that the arbitration
clause in the Distributorship Agreement in question is valid and the dispute between the
parties is arbitrable, this Court affirmed the trial court's decision denying petitioner's Motion to
Suspend Proceedings pursuant to the arbitration clause under the contract. In so ruling, this
Court held that as contracts produce legal effect between the parties, their assigns and heirs,
only the parties to the Distributorship Agreement are bound by its terms, including the
arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be
called for but only with respect to the parties to the contract in question. Considering that
there are parties to the case who are neither parties to the Distributorship Agreement nor
heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v.
Laperal Realty Corporation,21 held that to tolerate the splitting of proceedings by allowing
arbitration as to some of the parties on the one hand and trial for the others on the other
hand would, in effect, result in multiplicity of suits, duplicitous procedure and
unnecessary delay.22 Thus, we ruled that the interest of justice would best be served if the
trial court hears and adjudicates the case in a single and complete proceeding.

It is established that petitioners in the present cases who have presented legitimate
interests in the resolution of the controversy are not parties to the PIATCO Contracts.
Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA and
hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive
resolution of all the critical issues in the present controversy, including those raised
by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is
precisely to allow an expeditious determination of a dispute. This objective would not be met
if this Court were to allow the parties to settle the cases by arbitration as there are certain
issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will not be
equipped to resolve.

Now, to the merits of the instant controversy.

Is PIATCO a qualified bidder?

Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a
duly pre-qualified bidder on the unsolicited proposal submitted by AEDC as the Paircargo
Consortium failed to meet the financial capability required under the BOT Law and the Bid
Documents. They allege that in computing the ability of the Paircargo Consortium to meet
the minimum equity requirements for the project, the entire net worth of Security Bank, a
member of the consortium, should not be considered.

PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14,
1996 issued by the DOTC Undersecretary Primitivo C. Cal stating that the Paircargo
Consortium is found to have a combined net worth of P3,900,000,000.00, sufficient to meet
the equity requirements of the project. The said Memorandum was in response to a letter
from Mr. Antonio Henson of AEDC to President Fidel V. Ramos questioning the financial
capability of the Paircargo Consortium on the ground that it does not have the financial
resources to put up the required minimum equity of P2,700,000,000.00. This contention is
based on the restriction under R.A. No. 337, as amended or the General Banking Act that a
commercial bank cannot invest in any single enterprise in an amount more than 15% of its
net worth. In the said Memorandum, Undersecretary Cal opined:

The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that
financial capability will be evaluated based on total financial capability of all the
member companies of the [Paircargo] Consortium. In this connection, the Challenger
was found to have a combined net worth of P3,926,421,242.00 that could support a
project costing approximately P13 Billion.

It is not a requirement that the net worth must be "unrestricted." To impose that as a
requirement now will be nothing less than unfair.

The financial statement or the net worth is not the sole basis in establishing financial
capability. As stated in Bid Bulletin No. 3, financial capability may also be established
by testimonial letters issued by reputable banks. The Challenger has complied with
this requirement.

To recap, net worth reflected in the Financial Statement should not be taken as the
amount of the money to be used to answer the required thirty percent (30%) equity of
the challenger but rather to be used in establishing if there is enough basis to believe
that the challenger can comply with the required 30% equity. In fact, proof of
sufficient equity is required as one of the conditions for award of contract (Section
12.1 IRR of the BOT Law) but not for pre-qualification (Section 5.4 of the same
document).23

Under the BOT Law, in case of a build-operate-and-transfer arrangement, the


contract shall be awarded to the bidder "who, having satisfied the minimum
financial, technical, organizational and legal standards" required by the law, has
submitted the lowest bid and most favorable terms of the project.24 Further, the 1994
Implementing Rules and Regulations of the BOT Law provide:

Section 5.4 Pre-qualification Requirements.

xxx xxx xxx

c. Financial Capability: The project proponent must have adequate capability to


sustain the financing requirements for the detailed engineering design, construction
and/or operation and maintenance phases of the project, as the case may be. For
purposes of pre-qualification, this capability shall be measured in terms of (i) proof
of the ability of the project proponent and/or the consortium to provide a
minimum amount of equity to the project, and (ii) a letter testimonial from
reputable banks attesting that the project proponent and/or members of the
consortium are banking with them, that they are in good financial standing,
and that they have adequate resources. The government agency/LGU concerned
shall determine on a project-to-project basis and before pre-qualification, the
minimum amount of equity needed. (emphasis supplied)
Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996
amending the financial capability requirements for pre-qualification of the project proponent
as follows:

6. Basis of Pre-qualification

The basis for the pre-qualification shall be on the compliance of the proponent to the
minimum technical and financial requirements provided in the Bid Documents and in
the IRR of the BOT Law, R.A. No. 6957, as amended by R.A. 7718.

The minimum amount of equity to which the proponent's financial capability will be
based shall be thirty percent (30%) of the project cost instead of the twenty
percent (20%) specified in Section 3.6.4 of the Bid Documents. This is to
correlate with the required debt-to-equity ratio of 70:30 in Section 2.01a of the draft
concession agreement. The debt portion of the project financing should not exceed
70% of the actual project cost.

Accordingly, based on the above provisions of law, the Paircargo Consortium or any
challenger to the unsolicited proposal of AEDC has to show that it possesses the
requisite financial capability to undertake the project in the minimum amount of 30% of
the project cost through (i) proof of the ability to provide a minimum amount of equity to the
project, and (ii) a letter testimonial from reputable banks attesting that the project proponent
or members of the consortium are banking with them, that they are in good financial
standing, and that they have adequate resources.

As the minimum project cost was estimated to be US$350,000,000.00 or roughly


P9,183,650,000.00,25 the Paircargo Consortium had to show to the satisfaction of the PBAC
that it had the ability to provide the minimum equity for the project in the amount of at
least P2,755,095,000.00.

Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net
worth of P2,783,592.00 and P3,123,515.00 respectively.26 PAGS' Audited Financial
Statements as of 1995 indicate that it has approximately P26,735,700.00 to invest as its
equity for the project.27 Security Bank's Audited Financial Statements as of 1995 show that it
has a net worth equivalent to its capital funds in the amount of P3,523,504,377.00.28

We agree with public respondents that with respect to Security Bank, the entire amount of
its net worth could not be invested in a single undertaking or enterprise, whether allied or
non-allied in accordance with the provisions of R.A. No. 337, as amended or the General
Banking Act:

Sec. 21-B. The provisions in this or in any other Act to the contrary notwithstanding,
the Monetary Board, whenever it shall deem appropriate and necessary to further
national development objectives or support national priority projects, may authorize
a commercial bank, a bank authorized to provide commercial banking services,
as well as a government-owned and controlled bank, to operate under an
expanded commercial banking authority and by virtue thereof exercise, in
addition to powers authorized for commercial banks, the powers of an
Investment House as provided in Presidential Decree No. 129, invest in the
equity of a non-allied undertaking, or own a majority or all of the equity in a
financial intermediary other than a commercial bank or a bank authorized to provide
commercial banking services: Provided, That (a) the total investment in equities
shall not exceed fifty percent (50%) of the net worth of the bank; (b) the equity
investment in any one enterprise whether allied or non-allied shall not exceed
fifteen percent (15%) of the net worth of the bank; (c) the equity investment of the
bank, or of its wholly or majority-owned subsidiary, in a single non-allied undertaking
shall not exceed thirty-five percent (35%) of the total equity in the enterprise nor shall
it exceed thirty-five percent (35%) of the voting stock in that enterprise; and (d) the
equity investment in other banks shall be deducted from the investing bank's net
worth for purposes of computing the prescribed ratio of net worth to risk assets.

xxx xxx xxx

Further, the 1993 Manual of Regulations for Banks provides:

SECTION X383. Other Limitations and Restrictions. — The following limitations and
restrictions shall also apply regarding equity investments of banks.

a. In any single enterprise. — The equity investments of banks in any single


enterprise shall not exceed at any time fifteen percent (15%) of the net worth of the
investing bank as defined in Sec. X106 and Subsec. X121.5.

Thus, the maximum amount that Security Bank could validly invest in the Paircargo
Consortium is only P528,525,656.55, representing 15% of its entire net worth. The total net
worth therefore of the Paircargo Consortium, after considering the maximum amounts that
may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the
project cost,29 an amount substantially less than the prescribed minimum equity investment
required for the project in the amount of P2,755,095,000.00 or 30% of the project cost.

The purpose of pre-qualification in any public bidding is to determine, at the earliest


opportunity, the ability of the bidder to undertake the project. Thus, with respect to the
bidder's financial capacity at the pre-qualification stage, the law requires the government
agency to examine and determine the ability of the bidder to fund the entire cost of the
project by considering the maximum amounts that each bidder may invest in the
project at the time of pre-qualification.

The PBAC has determined that any prospective bidder for the construction, operation and
maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in
the minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity
ratio prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC
should determine the maximum amounts that each member of the consortium may commit
for the construction, operation and maintenance of the NAIA IPT III project at the time of
pre-qualification. With respect to Security Bank, the maximum amount which may be
invested by it would only be 15% of its net worth in view of the restrictions imposed by the
General Banking Act. Disregarding the investment ceilings provided by applicable law would
not result in a proper evaluation of whether or not a bidder is pre-qualified to undertake the
project as for all intents and purposes, such ceiling or legal restriction determines the true
maximum amount which a bidder may invest in the project.

Further, the determination of whether or not a bidder is pre-qualified to undertake the project
requires an evaluation of the financial capacity of the said bidder at the time the bid is
submitted based on the required documents presented by the bidder. The PBAC should not
be allowed to speculate on the future financial ability of the bidder to undertake the project
on the basis of documents submitted. This would open doors to abuse and defeat the very
purpose of a public bidding. This is especially true in the case at bar which involves the
investment of billions of pesos by the project proponent. The relevant government authority
is duty-bound to ensure that the awardee of the contract possesses the minimum required
financial capability to complete the project. To allow the PBAC to estimate the bidder's future
financial capability would not secure the viability and integrity of the project. A restrictive and
conservative application of the rules and procedures of public bidding is necessary not only
to protect the impartiality and regularity of the proceedings but also to ensure the financial
and technical reliability of the project. It has been held that:

The basic rule in public bidding is that bids should be evaluated based on the
required documents submitted before and not after the opening of bids. Otherwise,
the foundation of a fair and competitive public bidding would be defeated. Strict
observance of the rules, regulations, and guidelines of the bidding process is
the only safeguard to a fair, honest and competitive public bidding.30

Thus, if the maximum amount of equity that a bidder may invest in the project at the time
the bids are submittedfalls short of the minimum amounts required to be put up by the
bidder, said bidder should be properly disqualified. Considering that at the pre-qualification
stage, the maximum amounts which the Paircargo Consortium may invest in the project fell
short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium
was not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo
Consortium, a disqualified bidder, is null and void.

While it would be proper at this juncture to end the resolution of the instant controversy, as
the legal effects of the disqualification of respondent PIATCO's predecessor would come into
play and necessarily result in the nullity of all the subsequent contracts entered by it in
pursuance of the project, the Court feels that it is necessary to discuss in full the pressing
issues of the present controversy for a complete resolution thereof.

II

Is the 1997 Concession Agreement valid?

Petitioners and public respondents contend that the 1997 Concession Agreement is invalid
as it contains provisions that substantially depart from the draft Concession Agreement
included in the Bid Documents. They maintain that a substantial departure from the draft
Concession Agreement is a violation of public policy and renders the 1997 Concession
Agreement null and void.

PIATCO maintains, however, that the Concession Agreement attached to the Bid Documents
is intended to be a draft, i.e., subject to change, alteration or modification, and that this
intention was clear to all participants, including AEDC, and DOTC/MIAA. It argued further
that said intention is expressed in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which
states:

6. Amendments to the Draft Concessions Agreement

Amendments to the Draft Concessions Agreement shall be issued from time to time.
Said amendments shall only cover items that would not materially affect the
preparation of the proponent's proposal.
By its very nature, public bidding aims to protect the public interest by giving the public the
best possible advantages through open competition. Thus:

Competition must be legitimate, fair and honest. In the field of government contract
law, competition requires, not only `bidding upon a common standard, a common
basis, upon the same thing, the same subject matter, the same undertaking,' but
also that it be legitimate, fair and honest; and not designed to injure or defraud
the government.31

An essential element of a publicly bidded contract is that all bidders must be on equal
footing. Not simply in terms of application of the procedural rules and regulations imposed by
the relevant government agency, but more importantly, on the contract bidded upon. Each
bidder must be able to bid on the same thing. The rationale is obvious. If the winning bidder
is allowed to later include or modify certain provisions in the contract awarded such that the
contract is altered in any material respect, then the essence of fair competition in the public
bidding is destroyed. A public bidding would indeed be a farce if after the contract is
awarded, the winning bidder may modify the contract and include provisions which are
favorable to it that were not previously made available to the other bidders. Thus:

It is inherent in public biddings that there shall be a fair competition among the
bidders. The specifications in such biddings provide the common ground or basis for
the bidders. The specifications should, accordingly, operate equally or
indiscriminately upon all bidders.32

The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota:

The law is well settled that where, as in this case, municipal authorities can only let a
contract for public work to the lowest responsible bidder, the proposals and
specifications therefore must be so framed as to permit free and full competition. Nor
can they enter into a contract with the best bidder containing substantial
provisions beneficial to him, not included or contemplated in the terms and
specifications upon which the bids were invited.33

In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft
concession agreement is subject to amendment, the pertinent portion of which was quoted
above, the PBAC also clarified that "[s]aid amendments shall only cover items that
would not materially affect the preparation of the proponent's proposal."

While we concede that a winning bidder is not precluded from modifying or amending certain
provisions of the contract bidded upon, such changes must not constitute substantial or
material amendments that would alter the basic parameters of the contract and would
constitute a denial to the other bidders of the opportunity to bid on the same terms.
Hence, the determination of whether or not a modification or amendment of a contract
bidded out constitutes a substantial amendment rests on whether the contract, when taken
as a whole, would contain substantially different terms and conditions that would have the
effect of altering the technical and/or financial proposals previously submitted by other
bidders. The alterations and modifications in the contract executed between the government
and the winning bidder must be such as to render such executed contract to be an entirely
different contract from the one that was bidded upon.

In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc.,34 this Court quoted with
approval the ruling of the trial court that an amendment to a contract awarded through public
bidding, when such subsequent amendment was made without a new public bidding, is null
and void:

The Court agrees with the contention of counsel for the plaintiffs that the due
execution of a contract after public bidding is a limitation upon the right of the
contracting parties to alter or amend it without another public bidding, for
otherwise what would a public bidding be good for if after the execution of a
contract after public bidding, the contracting parties may alter or amend the
contract, or even cancel it, at their will?Public biddings are held for the protection
of the public, and to give the public the best possible advantages by means of open
competition between the bidders. He who bids or offers the best terms is awarded
the contract subject of the bid, and it is obvious that such protection and best
possible advantages to the public will disappear if the parties to a contract executed
after public bidding may alter or amend it without another previous public bidding.35

Hence, the question that comes to fore is this: is the 1997 Concession Agreement the same
agreement that was offered for public bidding, i.e., the draft Concession Agreement attached
to the Bid Documents? A close comparison of the draft Concession Agreement attached to
the Bid Documents and the 1997 Concession Agreement reveals that the documents differ in
at least two material respects:

a. Modification on the Public

Utility Revenues and Non-Public

Utility Revenues that may be

collected by PIATCO

The fees that may be imposed and collected by PIATCO under the draft Concession
Agreement and the 1997 Concession Agreement may be classified into three distinct
categories: (1) fees which are subject to periodic adjustment of once every two years in
accordance with a prescribed parametric formula and adjustments are made effective only
upon written approval by MIAA; (2) fees other than those included in the first category which
maybe adjusted by PIATCO whenever it deems necessary without need for consent of
DOTC/MIAA; and (3) new fees and charges that may be imposed by PIATCO which have
not been previously imposed or collected at the Ninoy Aquino International Airport
Passenger Terminal I, pursuant to Administrative Order No. 1, Series of 1993, as amended.
The glaring distinctions between the draft Concession Agreement and the 1997 Concession
Agreement lie in the types of fees included in each category and the extent of the
supervision and regulation which MIAA is allowed to exercise in relation thereto.

For fees under the first category, i.e., those which are subject to periodic adjustment in
accordance with a prescribed parametric formula and effective only upon written approval by
MIAA, the draft Concession Agreementincludes the following:36

(1) aircraft parking fees;

(2) aircraft tacking fees;

(3) groundhandling fees;


(4) rentals and airline offices;

(5) check-in counter rentals; and

(6) porterage fees.

Under the 1997 Concession Agreement, fees which are subject to adjustment and effective
upon MIAA approval are classified as "Public Utility Revenues" and include:37

(1) aircraft parking fees;

(2) aircraft tacking fees;

(3) check-in counter fees; and

(4) Terminal Fees.

The implication of the reduced number of fees that are subject to MIAA approval is best
appreciated in relation to fees included in the second category identified above. Under
the 1997 Concession Agreement, fees which PIATCO may adjust whenever it deems
necessary without need for consent of DOTC/MIAA are "Non-Public Utility Revenues" and is
defined as "all other income not classified as Public Utility Revenues derived from operations
of the Terminal and the Terminal Complex."38 Thus, under the 1997 Concession Agreement,
ground handling fees, rentals from airline offices and porterage fees are no longer subject to
MIAA regulation.

Further, under Section 6.03 of the draft Concession Agreement, MIAA reserves the right to
regulate (1) lobby and vehicular parking fees and (2) other new fees and charges that may
be imposed by PIATCO. Such regulation may be made by periodic adjustment and is
effective only upon written approval of MIAA. The full text of said provision is quoted below:

Section 6.03. Periodic Adjustment in Fees and Charges. Adjustments in the aircraft
parking fees, aircraft tacking fees, groundhandling fees, rentals and airline offices,
check-in-counter rentals and porterage fees shall be allowed only once every two
years and in accordance with the Parametric Formula attached hereto as Annex F.
Provided that adjustments shall be made effective only after the written express
approval of the MIAA. Provided, further, that such approval of the MIAA, shall be
contingent only on the conformity of the adjustments with the above said parametric
formula. The first adjustment shall be made prior to the In-Service Date of the
Terminal.

The MIAA reserves the right to regulate under the foregoing terms and
conditions the lobby and vehicular parking fees and other new fees and
charges as contemplated in paragraph 2 of Section 6.01 if in its judgment the
users of the airport shall be deprived of a free option for the services they
cover.39

On the other hand, the equivalent provision under the 1997 Concession Agreement reads:

Section 6.03 Periodic Adjustment in Fees and Charges.


xxx xxx xxx

(c) Concessionaire shall at all times be judicious in fixing fees and charges
constituting Non-Public Utility Revenues in order to ensure that End Users are not
unreasonably deprived of services. While the vehicular parking fee, porterage fee
and greeter/well wisher fee constitute Non-Public Utility Revenues of
Concessionaire, GRP may intervene and require Concessionaire to explain and
justify the fee it may set from time to time, if in the reasonable opinion of GRP the
said fees have become exorbitant resulting in the unreasonable deprivation of End
Users of such services.40

Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2)
porterage fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO
to explain and justify the fees set by PIATCO. In the draft Concession
Agreement, vehicular parking fee is subject to MIAA regulation and approval under the
second paragraph of Section 6.03 thereof while porterage fee is covered by the first
paragraph of the same provision. There is an obvious relaxation of the extent of control and
regulation by MIAA with respect to the particular fees that may be charged by PIATCO.

Moreover, with respect to the third category of fees that may be imposed and collected by
PIATCO, i.e., new fees and charges that may be imposed by PIATCO which have not been
previously imposed or collected at the Ninoy Aquino International Airport Passenger
Terminal I, under Section 6.03 of the draft Concession Agreement MIAA has reserved the
right to regulate the same under the same conditions that MIAA may regulate fees under the
first category, i.e., periodic adjustment of once every two years in accordance with a
prescribed parametric formula and effective only upon written approval by MIAA. However,
under the 1997 Concession Agreement, adjustment of fees under the third category is not
subject to MIAA regulation.

With respect to terminal fees that may be charged by PIATCO,41 as shown earlier, this was
included within the category of "Public Utility Revenues" under the 1997 Concession
Agreement. This classification is significant because under the 1997 Concession
Agreement, "Public Utility Revenues" are subject to an "Interim Adjustment" of fees upon
the occurrence of certain extraordinary events specified in the agreement.42 However, under
the draft Concession Agreement, terminal fees are not included in the types of fees that
may be subject to "Interim Adjustment."43

Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal
fees, are denominated in US Dollars44 while payments to the Government are in Philippine
Pesos. In the draft Concession Agreement,no such stipulation was included. By stipulating
that "Public Utility Revenues" will be paid to PIATCO in US Dollars while payments by
PIATCO to the Government are in Philippine currency under the 1997 Concession
Agreement, PIATCO is able to enjoy the benefits of depreciations of the Philippine Peso,
while being effectively insulated from the detrimental effects of exchange rate fluctuations.

When taken as a whole, the changes under the 1997 Concession Agreement with respect to
reduction in the types of fees that are subject to MIAA regulation and the relaxation of such
regulation with respect to other fees are significant amendments that substantially distinguish
the draft Concession Agreement from the 1997 Concession Agreement. The 1997
Concession Agreement, in this respect, clearly gives PIATCO more favorable terms
than what was available to other bidders at the time the contract was bidded out. It is
not very difficult to see that the changes in the 1997 Concession Agreement translate
to direct and concrete financial advantages for PIATCO which were not available at the
time the contract was offered for bidding. It cannot be denied that under the 1997
Concession Agreement only "Public Utility Revenues" are subject to MIAA regulation.
Adjustments of all other fees imposed and collected by PIATCO are entirely within its control.
Moreover, with respect to terminal fees, under the 1997 Concession Agreement, the same is
further subject to "Interim Adjustments" not previously stipulated in the draft Concession
Agreement. Finally, the change in the currency stipulated for "Public Utility Revenues" under
the 1997 Concession Agreement, except terminal fees, gives PIATCO an added benefit
which was not available at the time of bidding.

b. Assumption by the

Government of the liabilities of

PIATCO in the event of the latter's

default thereof

Under the draft Concession Agreement, default by PIATCO of any of its obligations to
creditors who have provided, loaned or advanced funds for the NAIA IPT III project does not
result in the assumption by the Government of these liabilities. In fact, nowhere in the said
contract does default of PIATCO's loans figure in the agreement. Such default does not
directly result in any concomitant right or obligation in favor of the Government.

However, the 1997 Concession Agreement provides:

Section 4.04 Assignment.

xxx xxx xxx

(b) In the event Concessionaire should default in the payment of an Attendant


Liability, and the default has resulted in the acceleration of the payment due date of
the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
Concessionaire shall immediately inform GRP in writing of such default. GRP shall,
within one hundred eighty (180) Days from receipt of the joint written notice of the
Unpaid Creditors and Concessionaire, either (i) take over the Development Facility
and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified, to
be substituted as concessionaire and operator of the Development Facility in
accordance with the terms and conditions hereof, or designate a qualified operator
acceptable to GRP to operate the Development Facility, likewise under the terms and
conditions of this Agreement; Provided that if at the end of the 180-day period GRP
shall not have served the Unpaid Creditors and Concessionaire written notice of its
choice, GRP shall be deemed to have elected to take over the Development Facility
with the concomitant assumption of Attendant Liabilities.

(c) If GRP should, by written notice, allow the Unpaid Creditors to be substituted as
concessionaire, the latter shall form and organize a concession company qualified to
take over the operation of the Development Facility. If the concession company
should elect to designate an operator for the Development Facility, the concession
company shall in good faith identify and designate a qualified operator acceptable to
GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the
concession company, acting in good faith and with due diligence, is unable to
designate a qualified operator within the aforesaid period, then GRP shall at the end
of the 180-day period take over the Development Facility and assume Attendant
Liabilities.

The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:

Attendant Liabilities refer to all amounts recorded and from time to time outstanding
in the books of the Concessionaire as owing to Unpaid Creditors who have
provided, loaned or advanced funds actually used for the Project, including all
interests, penalties, associated fees, charges, surcharges, indemnities,
reimbursements and other related expenses, and further including amounts owed by
Concessionaire to its suppliers, contractors and sub-contractors.

Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant
Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project
triggers the occurrence of certain events that leads to the assumption by the
Government of the liability for the loans. Only in one instance may the Government
escape the assumption of PIATCO's liabilities, i.e., when the Government so elects and
allows a qualified operator to take over as Concessionaire. However, this circumstance is
dependent on the existence and availability of a qualified operator who is willing to
take over the rights and obligations of PIATCO under the contract, a circumstance
that is not entirely within the control of the Government.

Without going into the validity of this provision at this juncture, suffice it to state that Section
4.04 of the 1997 Concession Agreement may be considered a form of security for the loans
PIATCO has obtained to finance the project, an option that was not made available in the
draft Concession Agreement. Section 4.04 is an important amendment to the 1997
Concession Agreement because it grants PIATCO a financial advantage or benefit which
was not previously made available during the bidding process. This financial advantage
is a significant modification that translates to better terms and conditions for PIATCO.

PIATCO, however, argues that the parties to the bidding procedure acknowledge that the
draft Concession Agreement is subject to amendment because the Bid Documents permit
financing or borrowing. They claim that it was the lenders who proposed the amendments to
the draft Concession Agreement which resulted in the 1997 Concession Agreement.

We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow
the project proponent or the winning bidder to obtain financing for the project, especially in
this case which involves the construction, operation and maintenance of the NAIA IPT III.
Expectedly, compliance by the project proponent of its undertakings therein would involve a
substantial amount of investment. It is therefore inevitable for the awardee of the contract to
seek alternate sources of funds to support the project. Be that as it may, this Court maintains
that amendments to the contract bidded upon should always conform to the general policy
on public bidding if such procedure is to be faithful to its real nature and purpose. By its very
nature and characteristic, competitive public bidding aims to protect the public interest by
giving the public the best possible advantages through open competition.45 It has been held
that the three principles in public bidding are (1) the offer to the public; (2) opportunity for
competition; and (3) a basis for the exact comparison of bids. A regulation of the matter
which excludes any of these factors destroys the distinctive character of the system and
thwarts the purpose of its adoption.46 These are the basic parameters which every awardee
of a contract bidded out must conform to, requirements of financing and borrowing
notwithstanding. Thus, upon a concrete showing that, as in this case, the contract signed by
the government and the contract-awardee is an entirely different contract from the contract
bidded, courts should not hesitate to strike down said contract in its entirety for violation of
public policy on public bidding. A strict adherence on the principles, rules and regulations on
public bidding must be sustained if only to preserve the integrity and the faith of the general
public on the procedure.

Public bidding is a standard practice for procuring government contracts for public service
and for furnishing supplies and other materials. It aims to secure for the government the
lowest possible price under the most favorable terms and conditions, to curtail favoritism in
the award of government contracts and avoid suspicion of anomalies and it places all bidders
in equal footing.47 Any government action which permits any substantial variance
between the conditions under which the bids are invited and the contract executed
after the award thereof is a grave abuse of discretion amounting to lack or excess of
jurisdiction which warrants proper judicial action.

In view of the above discussion, the fact that the foregoing substantial amendments were
made on the 1997 Concession Agreement renders the same null and void for
being contrary to public policy. These amendments convert the 1997 Concession
Agreement to an entirely different agreement from the contract bidded out or the draft
Concession Agreement. It is not difficult to see that the amendments on (1) the types of fees
or charges that are subject to MIAA regulation or control and the extent thereof and (2) the
assumption by the Government, under certain conditions, of the liabilities of PIATCO directly
translates concrete financial advantages to PIATCO that were previously not available
during the bidding process. These amendments cannot be taken as merely supplements
to or implementing provisions of those already existing in the draft Concession Agreement.
The amendments discussed above present new terms and conditions which provide financial
benefit to PIATCO which may have altered the technical and financial parameters of other
bidders had they known that such terms were available.

III

Direct Government Guarantee

Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession
Agreement provides:

Section 4.04 Assignment

xxx xxx xxx

(b) In the event Concessionaire should default in the payment of an Attendant


Liability, and the default resulted in the acceleration of the payment due date of the
Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and
Concessionaire shall immediately inform GRP in writing of such default. GRP shall
within one hundred eighty (180) days from receipt of the joint written notice of the
Unpaid Creditors and Concessionaire, either (i) take over the Development Facility
and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified
to be substituted as concessionaire and operator of the Development facility in
accordance with the terms and conditions hereof, or designate a qualified operator
acceptable to GRP to operate the Development Facility, likewise under the terms and
conditions of this Agreement; Provided, that if at the end of the 180-day period GRP
shall not have served the Unpaid Creditors and Concessionaire written notice of its
choice, GRP shall be deemed to have elected to take over the Development
Facility with the concomitant assumption of Attendant Liabilities.

(c) If GRP, by written notice, allow the Unpaid Creditors to be substituted as


concessionaire, the latter shall form and organize a concession company qualified to
takeover the operation of the Development Facility. If the concession company
should elect to designate an operator for the Development Facility, the concession
company shall in good faith identify and designate a qualified operator acceptable to
GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the
concession company, acting in good faith and with due diligence, is unable to
designate a qualified operator within the aforesaid period, then GRP shall at the end
of the 180-day period take over the Development Facility and assume Attendant
Liabilities.

….

Section 1.06. Attendant Liabilities

Attendant Liabilities refer to all amounts recorded and from time to time
outstanding in the books of the Concessionaire as owing to Unpaid
Creditors who have provided, loaned or advanced funds actually used for the
Project, including all interests, penalties, associated fees, charges, surcharges,
indemnities, reimbursements and other related expenses, and further including
amounts owed by Concessionaire to its suppliers, contractors and sub-contractors.48

It is clear from the above-quoted provisions that Government, in the event that PIATCO
defaults in its loan obligations, is obligated to pay "all amounts recorded and from time
to time outstanding from the books" of PIATCO which the latter owes to its creditors.49 These
amounts include "all interests, penalties, associated fees, charges, surcharges, indemnities,
reimbursements and other related expenses."50 This obligation of the Government to pay
PIATCO's creditors upon PIATCO's default would arise if the Government opts to take over
NAIA IPT III. It should be noted, however, that even if the Government chooses the second
option, which is to allow PIATCO's unpaid creditors operate NAIA IPT III, the Government is
still at a risk of being liable to PIATCO's creditors should the latter be unable to designate a
qualified operator within the prescribed period.51 In effect, whatever option the
Government chooses to take in the event of PIATCO's failure to fulfill its loan
obligations, the Government is still at a risk of assuming PIATCO's outstanding loans.
This is due to the fact that the Government would only be free from assuming PIATCO's
debts if the unpaid creditors would be able to designate a qualified operator within the period
provided for in the contract. Thus, the Government's assumption of liability is virtually
out of its control. The Government under the circumstances provided for in the 1997
Concession Agreement is at the mercy of the existence, availability and willingness of a
qualified operator. The above contractual provisions constitute a direct government
guarantee which is prohibited by law.

One of the main impetus for the enactment of the BOT Law is the lack of government funds
to construct the infrastructure and development projects necessary for economic growth and
development. This is why private sector resources are being tapped in order to finance these
projects. The BOT law allows the private sector to participate, and is in fact encouraged to do
so by way of incentives, such as minimizing the unstable flow of returns,52 provided that the
government would not have to unnecessarily expend scarcely available funds for the project
itself. As such, direct guarantee, subsidy and equity by the government in these projects are
strictly prohibited.53 This is but logical for if the government would in the end still be at
a risk of paying the debts incurred by the private entity in the BOT projects, then the
purpose of the law is subverted.

Section 2(n) of the BOT Law defines direct guarantee as follows:

(n) Direct government guarantee — An agreement whereby the government or any


of its agencies or local government units assume responsibility for the repayment of
debt directly incurred by the project proponent in implementing the project in
case of a loan default.

Clearly by providing that the Government "assumes" the attendant liabilities, which consists
of PIATCO's unpaid debts, the 1997 Concession Agreement provided for a direct
government guarantee for the debts incurred by PIATCO in the implementation of the NAIA
IPT III project. It is of no moment that the relevant sections are subsumed under the title of
"assignment". The provisions providing for direct government guarantee which is prohibited
by law is clear from the terms thereof.

The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal
defect. Article IV, Section 4.04(c), in relation to Article I, Section 1.06, of the ARCA provides:

Section 4.04 Security

xxx xxx xxx

(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith
and enter into direct agreement with the Senior Lenders, or with an agent of
such Senior Lenders (which agreement shall be subject to the approval of the
Bangko Sentral ng Pilipinas), in such form as may be reasonably acceptable to both
GRP and Senior Lenders, with regard, inter alia, to the following parameters:

xxx xxx xxx

(iv) If the Concessionaire [PIATCO] is in default under a payment


obligation owed to the Senior Lenders, and as a result thereof the Senior
Lenders have become entitled to accelerate the Senior Loans, the Senior
Lenders shall have the right to notify GRP of the same, and without prejudice
to any other rights of the Senior Lenders or any Senior Lenders' agent may
have (including without limitation under security interests granted in favor of
the Senior Lenders), to either in good faith identify and designate a nominee
which is qualified under sub-clause (viii)(y) below to operate the
Development Facility [NAIA Terminal 3] or transfer the Concessionaire's
[PIATCO] rights and obligations under this Agreement to a transferee which
is qualified under sub-clause (viii) below;

xxx xxx xxx

(vi) if the Senior Lenders, acting in good faith and using reasonable efforts,
are unable to designate a nominee or effect a transfer in terms and
conditions satisfactory to the Senior Lenders within one hundred eighty (180)
days after giving GRP notice as referred to respectively in (iv) or (v) above,
then GRP and the Senior Lenders shall endeavor in good faith to enter into
any other arrangement relating to the Development Facility [NAIA Terminal 3]
(other than a turnover of the Development Facility [NAIA Terminal 3] to GRP)
within the following one hundred eighty (180) days. If no agreement relating
to the Development Facility [NAIA Terminal 3] is arrived at by GRP and the
Senior Lenders within the said 180-day period, then at the end thereof
the Development Facility [NAIA Terminal 3] shall be transferred by the
Concessionaire [PIATCO] to GRP or its designee and GRP shall make a
termination payment to Concessionaire [PIATCO] equal to the
Appraised Value (as hereinafter defined) of the Development Facility
[NAIA Terminal 3] or the sum of the Attendant Liabilities, if greater.
Notwithstanding Section 8.01(c) hereof, this Agreement shall be deemed
terminated upon the transfer of the Development Facility [NAIA Terminal 3] to
GRP pursuant hereto;

xxx xxx xxx

Section 1.06. Attendant Liabilities

Attendant Liabilities refer to all amounts in each case supported by verifiable


evidence from time to time owed or which may become owing by Concessionaire
[PIATCO] to Senior Lenders or any other persons or entities who have provided,
loaned, or advanced funds or provided financial facilities to Concessionaire
[PIATCO] for the Project [NAIA Terminal 3], including, without limitation, all
principal, interest, associated fees, charges, reimbursements, and other
related expenses (including the fees, charges and expenses of any agents or
trustees of such persons or entities), whether payable at maturity, by acceleration or
otherwise, and further including amounts owed by Concessionaire [PIATCO] to its
professional consultants and advisers, suppliers, contractors and sub-contractors.54

It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill
its loan obligations to its Senior Lenders, the Government is obligated to directly negotiate
and enter into an agreement relating to NAIA IPT III with the Senior Lenders, should the
latter fail to appoint a qualified nominee or transferee who will take the place of PIATCO. If
the Senior Lenders and the Government are unable to enter into an agreement after the
prescribed period, the Government must then pay PIATCO, upon transfer of NAIA IPT III to
the Government, termination payment equal to the appraised value of the project or the
value of the attendant liabilities whichever is greater. Attendant liabilities as defined in
the ARCA includes all amounts owed or thereafter may be owed by PIATCO not only to the
Senior Lenders with whom PIATCO has defaulted in its loan obligations but to all other
persons who may have loaned, advanced funds or provided any other type of financial
facilities to PIATCO for NAIA IPT III. The amount of PIATCO's debt that the Government
would have to pay as a result of PIATCO's default in its loan obligations -- in case no
qualified nominee or transferee is appointed by the Senior Lenders and no other agreement
relating to NAIA IPT III has been reached between the Government and the Senior Lenders -
- includes, but is not limited to, "all principal, interest, associated fees, charges,
reimbursements, and other related expenses . . . whether payable at maturity, by
acceleration or otherwise."55

It is clear from the foregoing that the ARCA provides for a direct guarantee by the
government to pay PIATCO's loans not only to its Senior Lenders but all other entities
who provided PIATCO funds or services upon PIATCO's default in its loan obligation
with its Senior Lenders. The fact that the Government's obligation to pay PIATCO's lenders
for the latter's obligation would only arise after the Senior Lenders fail to appoint a qualified
nominee or transferee does not detract from the fact that, should the conditions as stated in
the contract occur, the ARCA still obligates the Government to pay any and all amounts
owed by PIATCO to its lenders in connection with NAIA IPT III. Worse, the conditions that
would make the Government liable for PIATCO's debts is triggered by PIATCO's own default
of its loan obligations to its Senior Lenders to which loan contracts the Government was
never a party to. The Government was not even given an option as to what course of action
it should take in case PIATCO defaulted in the payment of its senior loans. The Government,
upon PIATCO's default, would be merely notified by the Senior Lenders of the same and it is
the Senior Lenders who are authorized to appoint a qualified nominee or transferee. Should
the Senior Lenders fail to make such an appointment, the Government is then automatically
obligated to "directly deal and negotiate" with the Senior Lenders regarding NAIA IPT III. The
only way the Government would not be liable for PIATCO's debt is for a qualified nominee or
transferee to be appointed in place of PIATCO to continue the construction, operation and
maintenance of NAIA IPT III. This "pre-condition", however, will not take the contract out of
the ambit of a direct guarantee by the government as the existence, availability and
willingness of a qualified nominee or transferee is totally out of the government's control. As
such the Government is virtually at the mercy of PIATCO (that it would not default on its
loan obligations to its Senior Lenders), the Senior Lenders (that they would appoint a
qualified nominee or transferee or agree to some other arrangement with the Government)
and the existence of a qualified nominee or transferee who is able and willing to take the
place of PIATCO in NAIA IPT III.

The proscription against government guarantee in any form is one of the policy
considerations behind the BOT Law. Clearly, in the present case, the ARCA obligates the
Government to pay for all loans, advances and obligations arising out of financial facilities
extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO
default in its loan obligations to its Senior Lenders and the latter fails to appoint a qualified
nominee or transferee. This in effect would make the Government liable for PIATCO's loans
should the conditions as set forth in the ARCA arise. This is a form of direct government
guarantee.

The BOT Law and its implementing rules provide that in order for an unsolicited proposal for
a BOT project may be accepted, the following conditions must first be met: (1) the project
involves a new concept in technology and/or is not part of the list of priority projects, (2) no
direct government guarantee, subsidy or equity is required, and (3) the government
agency or local government unit has invited by publication other interested parties to a public
bidding and conducted the same.56 The failure to meet any of the above conditions will result
in the denial of the proposal. It is further provided that the presence of direct government
guarantee, subsidy or equity will "necessarily disqualify a proposal from being treated and
accepted as an unsolicited proposal."57 The BOT Law clearly and strictly prohibits direct
government guarantee, subsidy and equity in unsolicited proposals that the mere inclusion of
a provision to that effect is fatal and is sufficient to deny the proposal. It stands to reason
therefore that if a proposal can be denied by reason of the existence of direct government
guarantee, then its inclusion in the contract executed after the said proposal has been
accepted is likewise sufficient to invalidate the contract itself. A prohibited provision, the
inclusion of which would result in the denial of a proposal cannot, and should not, be allowed
to later on be inserted in the contract resulting from the said proposal. The basic rules of
justice and fair play alone militate against such an occurrence and must not, therefore, be
countenanced particularly in this instance where the government is exposed to the risk of
shouldering hundreds of million of dollars in debt.
This Court has long and consistently adhered to the legal maxim that those that cannot be
done directly cannot be done indirectly.58 To declare the PIATCO contracts valid despite
the clear statutory prohibition against a direct government guarantee would not only
make a mockery of what the BOT Law seeks to prevent -- which is to expose the
government to the risk of incurring a monetary obligation resulting from a contract of
loan between the project proponent and its lenders and to which the Government is
not a party to -- but would also render the BOT Law useless for what it seeks to
achieve –- to make use of the resources of the private sector in the "financing,
operation and maintenance of infrastructure and development projects"59which are
necessary for national growth and development but which the government,
unfortunately, could ill-afford to finance at this point in time.

IV

Temporary takeover of business affected with public interest

Article XII, Section 17 of the 1987 Constitution provides:

Section 17. In times of national emergency, when the public interest so requires, the
State may, during the emergency and under reasonable terms prescribed by it,
temporarily take over or direct the operation of any privately owned public utility or
business affected with public interest.

The above provision pertains to the right of the State in times of national emergency, and in
the exercise of its police power, to temporarily take over the operation of any business
affected with public interest. In the 1986 Constitutional Commission, the term "national
emergency" was defined to include threat from external aggression, calamities or national
disasters, but not strikes "unless it is of such proportion that would paralyze government
service."60 The duration of the emergency itself is the determining factor as to how long the
temporary takeover by the government would last.61 The temporary takeover by the
government extends only to the operation of the business and not to the ownership thereof.
As such the government is not required to compensate the private entity-owner of the
said business as there is no transfer of ownership, whether permanent or temporary.
The private entity-owner affected by the temporary takeover cannot, likewise, claim just
compensation for the use of the said business and its properties as the temporary takeover
by the government is in exercise of its police power and not of its power of eminent domain.

Article V, Section 5.10 (c) of the 1997 Concession Agreement provides:

Section 5.10 Temporary Take-over of operations by GRP.

….

(c) In the event the development Facility or any part thereof and/or the operations of
Concessionaire or any part thereof, become the subject matter of or be included in
any notice, notification, or declaration concerning or relating to acquisition, seizure or
appropriation by GRP in times of war or national emergency, GRP shall, by written
notice to Concessionaire, immediately take over the operations of the Terminal
and/or the Terminal Complex. During such take over by GRP, the Concession Period
shall be suspended; provided, that upon termination of war, hostilities or national
emergency, the operations shall be returned to Concessionaire, at which time, the
Concession period shall commence to run again. Concessionaire shall be entitled
to reasonable compensation for the duration of the temporary take over by
GRP, which compensation shall take into account the reasonable cost for the
use of the Terminal and/or Terminal Complex, (which is in the amount at least
equal to the debt service requirements of Concessionaire, if the temporary take
over should occur at the time when Concessionaire is still servicing debts owed to
project lenders), any loss or damage to the Development Facility, and other
consequential damages. If the parties cannot agree on the reasonable compensation
of Concessionaire, or on the liability of GRP as aforesaid, the matter shall be
resolved in accordance with Section 10.01 [Arbitration]. Any amount determined to
be payable by GRP to Concessionaire shall be offset from the amount next payable
by Concessionaire to GRP.62

PIATCO cannot, by mere contractual stipulation, contravene the Constitutional


provision on temporary government takeover and obligate the government to pay
"reasonable cost for the use of the Terminal and/or Terminal Complex."63 Article XII,
section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times
necessitate the government to "temporarily take over or direct the operation of any privately
owned public utility or business affected with public interest." It is the welfare and interest of
the public which is the paramount consideration in determining whether or not to temporarily
take over a particular business. Clearly, the State in effecting the temporary takeover is
exercising its police power. Police power is the "most essential, insistent, and illimitable of
powers."64 Its exercise therefore must not be unreasonably hampered nor its exercise be a
source of obligation by the government in the absence of damage due to arbitrariness of its
exercise.65 Thus, requiring the government to pay reasonable compensation for the
reasonable use of the property pursuant to the operation of the business contravenes the
Constitution.

Regulation of Monopolies

A monopoly is "a privilege or peculiar advantage vested in one or more persons or


companies, consisting in the exclusive right (or power) to carry on a particular business or
trade, manufacture a particular article, or control the sale of a particular commodity."66 The
1987 Constitution strictly regulates monopolies, whether private or public, and even
provides for their prohibition if public interest so requires. Article XII, Section 19 of the 1987
Constitution states:

Sec. 19. The state shall regulate or prohibit monopolies when the public interest so
requires. No combinations in restraint of trade or unfair competition shall be allowed.

Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to
exist to aid the government in carrying on an enterprise or to aid in the performance of
various services and functions in the interest of the public.67 Nonetheless, a determination
must first be made as to whether public interest requires a monopoly. As monopolies are
subject to abuses that can inflict severe prejudice to the public, they are subject to a higher
level of State regulation than an ordinary business undertaking.

In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is
granted the "exclusive rightto operate a commercial international passenger terminal within
the Island of Luzon" at the NAIA IPT III.68 This is with the exception of already existing
international airports in Luzon such as those located in the Subic Bay Freeport Special
Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag City.69 As
such, upon commencement of PIATCO's operation of NAIA IPT III, Terminals 1 and 2 of
NAIA would cease to function as international passenger terminals. This, however, does not
prevent MIAA to use Terminals 1 and 2 as domestic passenger terminals or in any other
manner as it may deem appropriate except those activities that would compete with NAIA
IPT III in the latter's operation as an international passenger terminal.70 The right granted to
PIATCO to exclusively operate NAIA IPT III would be for a period of twenty-five (25) years
from the In-Service Date71 and renewable for another twenty-five (25) years at the option of
the government.72 Both the 1997 Concession Agreement and the ARCA further provide
that, in view of the exclusive right granted to PIATCO, the concession contracts of the
service providers currently servicing Terminals 1 and 2 would no longer be renewed
and those concession contracts whose expiration are subsequent to the In-Service
Date would cease to be effective on the said date.73

The operation of an international passenger airport terminal is no doubt an undertaking


imbued with public interest. In entering into a Build–Operate-and-Transfer contract for the
construction, operation and maintenance of NAIA IPT III, the government has determined
that public interest would be served better if private sector resources were used in its
construction and an exclusive right to operate be granted to the private entity undertaking the
said project, in this case PIATCO. Nonetheless, the privilege given to PIATCO is subject to
reasonable regulation and supervision by the Government through the MIAA, which is the
government agency authorized to operate the NAIA complex, as well as DOTC, the
department to which MIAA is attached.74

This is in accord with the Constitutional mandate that a monopoly which is not prohibited
must be regulated.75 While it is the declared policy of the BOT Law to encourage private
sector participation by "providing a climate of minimum government regulations,"76 the same
does not mean that Government must completely surrender its sovereign power to protect
public interest in the operation of a public utility as a monopoly. The operation of said public
utility can not be done in an arbitrary manner to the detriment of the public which it seeks to
serve. The right granted to the public utility may be exclusive but the exercise of the right
cannot run riot. Thus, while PIATCO may be authorized to exclusively operate NAIA IPT III
as an international passenger terminal, the Government, through the MIAA, has the right and
the duty to ensure that it is done in accord with public interest. PIATCO's right to operate
NAIA IPT III cannot also violate the rights of third parties.

Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide:

3.01 Concession Period

xxx xxx xxx

(e) GRP confirms that certain concession agreements relative to certain services
and operations currently being undertaken at the Ninoy Aquino International Airport
passenger Terminal I have a validity period extending beyond the In-Service
Date. GRP through DOTC/MIAA, confirms that these services and operations shall
not be carried over to the Terminal and the Concessionaire is under no legal
obligation to permit such carry-over except through a separate agreement duly
entered into with Concessionaire. In the event Concessionaire becomes involved in
any litigation initiated by any such concessionaire or operator, GRP undertakes and
hereby holds Concessionaire free and harmless on full indemnity basis from and
against any loss and/or any liability resulting from any such litigation, including the
cost of litigation and the reasonable fees paid or payable to Concessionaire's
counsel of choice, all such amounts shall be fully deductible by way of an offset from
any amount which the Concessionaire is bound to pay GRP under this Agreement.

During the oral arguments on December 10, 2002, the counsel for the petitioners-in-
intervention for G.R. No. 155001 stated that there are two service providers whose
contracts are still existing and whose validity extends beyond the In-Service Date.
One contract remains valid until 2008 and the other until 2010.77

We hold that while the service providers presently operating at NAIA Terminal 1 do not have
an absolute right for the renewal or the extension of their respective contracts, those
contracts whose duration extends beyond NAIA IPT III's In-Service-Date should not be
unduly prejudiced. These contracts must be respected not just by the parties thereto but also
by third parties. PIATCO cannot, by law and certainly not by contract, render a valid and
binding contract nugatory. PIATCO, by the mere expedient of claiming an exclusive right to
operate, cannot require the Government to break its contractual obligations to the service
providers. In contrast to the arrastre and stevedoring service providers in the case of Anglo-
Fil Trading Corporation v. Lazaro78 whose contracts consist of temporary hold-over
permits, the affected service providers in the cases at bar, have a valid and binding contract
with the Government, through MIAA, whose period of effectivity, as well as the other terms
and conditions thereof, cannot be violated.

In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions
of the 1997 Concession Agreement and the ARCA did not strip government, thru the MIAA,
of its right to supervise the operation of the whole NAIA complex, including NAIA IPT III. As
the primary government agency tasked with the job,79 it is MIAA's responsibility to ensure
that whoever by contract is given the right to operate NAIA IPT III will do so within the
bounds of the law and with due regard to the rights of third parties and above all, the interest
of the public.

VI

CONCLUSION

In sum, this Court rules that in view of the absence of the requisite financial capacity of the
Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the
contract for the construction, operation and maintenance of the NAIA IPT III is null and void.
Further, considering that the 1997 Concession Agreement contains material and substantial
amendments, which amendments had the effect of converting the 1997 Concession
Agreement into an entirely different agreement from the contract bidded upon, the 1997
Concession Agreement is similarly null and void for being contrary to public policy. The
provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession
Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a
direct government guarantee expressly prohibited by, among others, the BOT Law and its
Implementing Rules and Regulations are also null and void. The Supplements, being
accessory contracts to the ARCA, are likewise null and void.

WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession
Agreement and the Supplements thereto are set aside for being null and void.

SO ORDERED.
Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona,
and Carpio-Morales, JJ., concur.
Vitug, J., see separate (dissenting) opinion.
Panganiban, J., please see separate opinion.
Quisumbing, J., no jurisdiction, please see separate opinion of J. Vitug in which he concurs.
Carpio, J., no part.
Callejo, Sr., J., also concur in the separate opinion of J. Panganiban.
Azcuna, J., joins the separate opinion of J. Vitug.

SEPARATE OPINIONS

VITUG, J.:

This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that
the Supreme Court shall exercise original jurisdiction over, among other actual controversies,
petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.1 The cases
in question, although denominated to be petitions for prohibition, actually pray for the
nullification of the PIATCO contracts and to restrain respondents from implementing said
agreements for being illegal and unconstitutional.

Section 2, Rule 65 of the Rules of Court states:

"When the proceedings of any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy and adequate remedy
in the ordinary course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that judgment be
rendered commanding the respondent to desist from further proceedings in the
action or matter specified therein, or otherwise granting such incidental reliefs as law
and justice may require."

The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation,
board, officer or person, exercising judicial, quasi-judicial or ministerial functions. What the
petitions seek from respondents do not involve judicial, quasi-judicial or ministerial functions.
In prohibition, only legal issues affecting the jurisdiction of the tribunal, board or officer
involved may be resolved on the basis of undisputed facts.2 The parties allege, respectively,
contentious evidentiary facts. It would be difficult, if not anomalous, to decide the
jurisdictional issue on the basis of the contradictory factual submissions made by the
parties.3 As the Court has so often exhorted, it is not a trier of facts.

The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the
Rules of Court. The Rules provide that any person interested under a contract may, before
breach or violation thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a declaration of his rights or
duties thereunder.4 The Supreme Court assumes no jurisdiction over petitions for declaratory
relief which are cognizable by regional trial courts.5
As I have so expressed in Tolentino vs. Secretary of Finance,6 reiterated in Santiago vs.
Guingona, Jr.7 , the Supreme Court should not be thought of as having been tasked with the
awesome responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such
as it may seem to be under the 1987 Constitution, judicial power still succumbs to the
paramount doctrine of separation of powers. The Court may not at good liberty intrude, in the
guise of sovereign imprimatur, into every affair of government. What significance can still
then remain of the time-honored and widely acclaimed principle of separation of powers if, at
every turn, the Court allows itself to pass upon at will the disposition of a co-equal,
independent and coordinate branch in our system of government. I dread to think of the so
varied uncertainties that such an undue interference can lead to.

Accordingly, I vote for the dismissal of the petition.

Quisumbing, and Azcuna, JJ., concur.

PANGANIBAN, J.:

The five contracts for the construction and the operation of Ninoy Aquino International Airport
(NAIA) Terminal III, the subject of the consolidated Petitions before the Court, are replete
with outright violations of law, public policy and the Constitution. The only proper thing to do
is declare them all null and void ab initio and let the chips fall where they may. Fiat iustitia
ruat coelum.

The facts leading to this controversy are already well presented in the ponencia. I shall not
burden the readers with a retelling thereof. Instead, I will cut to the chase and directly
address the two sets of gut issues:

1. The first issue is procedural: Does the Supreme Court have original jurisdiction to hear
and decide the Petitions? Corollarily, do petitioners have locus standi and should this Court
decide the cases without any mandatory referral to arbitration?

2. The second one is substantive in character: Did the subject contracts violate the
Constitution, the laws, and public policy to such an extent as to render all of them void and
inexistent?

My answer to all the above questions is a firm "Yes."

The Procedural Issue:


Jurisdiction, Standing and Arbitration

Definitely and surely, the issues involved in these Petitions are clearly of transcendental
importance and of national interest. The subject contracts pertain to the construction and the
operation of the country's premiere international airport terminal - an ultramodern world-class
public utility that will play a major role in the country's economic development and serve to
project a positive image of our country abroad. The five build-operate-&-transfer (BOT)
contracts, while entailing the investment of billions of pesos in capital and the availment of
several hundred millions of dollars in loans, contain provisions that tend to establish a
monopoly, require the disbursements of public funds sans appropriations, and provide
government guarantees in violation of statutory prohibitions, as well as other provisions
equally offensive to law, public policy and the Constitution. Public interest will inevitably be
affected thereby.

Thus, objections to these Petitions, grounded upon (a) the hierarchy of courts, (b) the need
for arbitration prior to court action, and (c) the alleged lack of sufficient personality, standing
or interest, being in the main procedural matters, must now be set aside, as they have been
in past cases. This Court must be permitted to perform its constitutional duty of determining
whether the other agencies of government have acted within the limits of the Constitution
and the laws, or if they have gravely abused the discretion entrusted to them.1

Hierarchy of Courts

The Court has, in the past, held that questions relating to gargantuan government contracts
ought to be settled without delay.2 This holding applies with greater force to the instant
cases. Respondent Piatco is partly correct in averring that petitioners can obtain relief from
the regional trial courts via an action to annul the contracts.

Nevertheless, the unavoidable consequence of having to await the rendition and the finality
of any such judgment would be a prolonged state of uncertainty that would be prejudicial to
the nation, the parties and the general public. And, in light of the feared loss of jobs of the
petitioning workers, consequent to the inevitable pretermination of contracts of the petitioning
service providers that will follow upon the heels of the impending opening of NAIA Terminal
III, the need for relief is patently urgent, and therefore, direct resort to this Court through the
special civil action of prohibition is thus justified.3

Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will
require delving into factual questions,4 I submit that their disposition ultimately turns on
questions of law.5 Further, many of the significant and relevant factual questions can be
easily addressed by an examination of the documents submitted by the parties. In any event,
the Petitions raise some novel questions involving the application of the amended BOT Law,
which this Court has seen fit to tackle.

Arbitration

Should the dispute be referred to arbitration prior to judicial recourse? Respondent Piatco
claims that Section 10.02 of the Amended and Restated Concession Agreement (ARCA)
provides for arbitration under the auspices of the International Chamber of Commerce to
settle any dispute or controversy or claim arising in connection with the Concession
Agreement, its amendments and supplements. The government disagrees, however,
insisting that there can be no arbitration based on Section 10.02 of the ARCA, since all the
Piatco contracts are void ab initio. Therefore, all contractual provisions, including Section
10.02 of the ARCA, are likewise void, inexistent and inoperative. To support its stand, the
government cites Chavez v. Presidential Commission on Good Government:6"The void
agreement will not be rendered operative by the parties' alleged performance (partial or full)
of their respective prestations. A contract that violates the Constitution and the law is null and
void ab initio and vests no rights and creates no obligations. It produces no legal effect at
all."

As will be discussed at length later, the Piatco contracts are indeed void in their entirety;
thus, a resort to the aforesaid provision on arbitration is unavailing. Besides, petitioners and
petitioners-in-intervention have pointed out that, even granting arguendo that the arbitration
clause remained a valid provision, it still cannot bind them inasmuch as they are not parties
to the Piatco contracts. And in the final analysis, it is unarguable that the arbitration process
provided for under Section 10.02 of the ARCA, to be undertaken by a panel of three (3)
arbitrators appointed in accordance with the Rules of Arbitration of the International Chamber
of Commerce, will not be able to address, determine and definitively resolve the
constitutional and legal questions that have been raised in the Petitions before us.

Locus Standi

Given this Court's previous decisions in cases of similar import, no one will seriously doubt
that, being taxpayers and members of the House of Representatives, Petitioners Baterina et
al. have locus standi to bring the Petition in GR No. 155547. In Albano v. Reyes,7 this Court
held that the petitioner therein, suing as a citizen, taxpayer and member of the House of
Representatives, was sufficiently clothed with standing to bring the suit questioning the
validity of the assailed contract. The Court cited the fact that public interest was involved, in
view of the important role of the Manila International Container Terminal (MICT) in the
country's economic development and the magnitude of the financial consideration. This,
notwithstanding the fact that expenditure of public funds was not required under the assailed
contract.

In the cases presently under consideration, petitioners' personal and substantial interest in
the controversy is shown by the fact that certain provisions in the Piatco contracts create
obligations on the part of government (through the DOTC and the MIAA) to disburse public
funds without prior congressional appropriations.

Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are
adversely affected as taxpayers on account of the illegal disbursement of public funds; and
(2) they are prejudiced qua legislators, since the contractual provisions requiring the
government to incur expenditures without appropriations also operate as limitations upon the
exclusive power and prerogative of Congress over the public purse. As members of the
House of Representatives, they are actually deprived of discretion insofar as the inclusion of
those items of expenditure in the budget is concerned. To prevent such encroachment upon
the legislative privilege and obviate injury to the institution of which they are members,
petitioners-legislators have locus standi to bring suit.

Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus possessed of standing
to challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are
employees (or representatives of employees) of various service providers that have (1)
existing concession agreements with the MIAA to provide airport services necessary to the
operation of the NAIA and (2) service agreements to furnish essential support services to the
international airlines operating at the NAIA.

On the other hand, Messrs. Lopez et al. are employees of the MIAA. These petitioners
(Messrs. Agan et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid
off from their jobs and losing their means of livelihood when their employer-companies are
forced to shut down or otherwise retrench and cut back on manpower. Such development
would result from the imminent implementation of certain provisions in the contracts that tend
toward the creation of a monopoly in favor of Piatco, its subsidiaries and related companies.

Petitioners-in-intervention are service providers in the business of furnishing airport-related


services to international airlines and passengers in the NAIA and are therefore competitors
of Piatco as far as that line of business is concerned. On account of provisions in the Piatco
contracts, petitioners-in-intervention have to enter into a written contract with Piatco so as
not to be shut out of NAIA Terminal III and barred from doing business there. Since there is
no provision to ensure or safeguard free and fair competition, they are literally at its mercy.
They claim injury on account of their deprivation of property (business) and of the liberty to
contract, without due process of law.

And even if petitioners and petitioners-in-intervention were not sufficiently clothed with legal
standing, I have at the outset already established that, given its impact on the public and on
national interest, this controversy is laden with transcendental importance and constitutional
significance. Hence, I do not hesitate to adopt the same position as was enunciated
in Kilosbayan v. Guingona Jr.8 that "in cases of transcendental importance, the Court may
relax the standing requirements and allow a suit to prosper even when there is no direct
injury to the party claiming the right of judicial review."9

The Substantive Issue:


Violations of the Constitution and the Laws

From the Outset, the Bidding Process Was Flawed and Tainted

After studying the documents submitted and arguments advanced by the parties, I have no
doubt that, right at the outset, Piatco was not qualified to participate in the bidding process
for the Terminal III project, but was nevertheless permitted to do so. It even won the bidding
and was helped along by what appears to be a series of collusive and corrosive acts.

The build-operate-and-transfer (BOT) project for the NAIA Passenger Terminal III comes
under the category of an "unsolicited proposal," which is the subject of Section 4-A of the
BOT Law.10 The unsolicited proposal was originally submitted by the Asia's Emerging Dragon
Corporation (AEDC) to the Department of Transportation and Communications (DOTC) and
the Manila International Airport Authority (MIAA), which reviewed and approved the proposal.

The draft of the concession agreement as negotiated between AEDC and DOTC/MIAA was
endorsed to the National Economic Development Authority (NEDA-ICC), which in turn
reviewed it on the basis of its scope, economic viability, financial indicators and risks; and
thereafter approved it for bidding.

The DOTC/MIAA then prepared the Bid Documents, incorporating therein the negotiated
Draft Concession Agreement, and published invitations for public bidding, i.e., for the
submission of comparative or competitive proposals. Piatco's predecessor-in-interest, the
Paircargo Consortium, was the only company that submitted a competitive bid or price
challenge.

At this point, I must emphasize that the law requires the award of a BOT project to the bidder
that has satisfied the minimum requirements; and met the technical, financial, organizational
and legal standards provided in the BOT Law. Section 5 of this statute states:

"Sec. 5. Public bidding of projects. - . . .

"In the case of a build-operate-and-transfer arrangement, the contract shall be


awarded to the bidder who, having satisfied the minimum financial, technical,
organizational and legal standards required by this Act, has submitted the lowest
bid and most favorable terms for the project, based on the present value of its
proposed tolls, fees, rentals and charges over a fixed term for the facility to be
constructed, rehabilitated, operated and maintained according to the prescribed
minimum design and performance standards, plans and specifications. . . ."
(Emphasis supplied.)

The same provision requires that the price challenge via public bidding "must be conducted
under a two-envelope/two-stage system: the first envelope to contain the technical proposal
and the second envelope to contain the financial proposal." Moreover, the 1994
Implementing Rules and Regulations (IRR) provide that only those bidders that have passed
the prequalification stage are permitted to have their two envelopes reviewed.

In other words, prospective bidders must prequalify by submitting their prequalification


documents for evaluation; and only the pre-qualified bidders would be entitled to have their
bids opened, evaluated and appreciated. On the other hand, disqualified bidders are to be
informed of the reason for their disqualification. This procedure was confirmed and reiterated
in the Bid Documents, which I quote thus: "Prequalified proponents will be considered
eligible to move to second stage technical proposal evaluation. The second and third
envelopes of pre-disqualified proponents will be returned."11

Aside from complying with the legal and technical requirements (track record or experience
of the firm and its key personnel), a project proponent desiring to prequalify must also
demonstrate its financial capacity to undertake the project. To establish such capability, a
proponent must prove that it is able to raise the minimum amount of equity required for the
project and to procure the loans or financing needed for it. Section 5.4(c) of the 1994 IRR
provides:

"Sec. 5.4. Prequalification Requirements. - To pre-qualify, a project proponent must


comply with the following requirements:

xxx xxx xxx

"c. Financial Capability. The project proponent must have adequate capability to
sustain the financing requirements for the detailed engineering design, construction,
and/or operation and maintenance phases of the project, as the case may be. For
purposes of prequalification, this capability shall be measured in terms of: (i) proof of
the ability of the project proponent and/or the consortium to provide a minimum
amount of equity to the project, and (ii) a letter testimonial from reputable banks
attesting that the project proponent and/or members of the consortium are banking
with them, that they are in good financial standing, and that they have adequate
resources. The government Agency/LGU concerned shall determine on a project-to-
project basis, and before prequalification, the minimum amount of equity needed. . . .
." (Italics supplied)

Since the minimum amount of equity for the project was set at 30 percent12 of the minimum
project cost of US$350 million, the minimum amount of equity required of any proponent
stood at US$105 million. Converted to pesos at the exchange rate then of P26.239 to
US$1.00 (as quoted by the Bangko Sentral ng Pilipinas), the peso equivalent of the minimum
equity was P2,755,095,000.

However, the combined equity or net worth of the Paircargo consortium stood at only
P558,384,871.55.13 This amount was only slightly over 6 percent of the minimum project cost
and very much short of the required minimum equity, which was equivalent to 30 percent of
the project cost. Such deficiency should have immediately caused the disqualification of the
Paircargo consortium. This matter was brought to the attention of the Prequalification and
Bidding Committee (PBAC).

Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C. Cal, concurrent


chair of the PBAC, declared in a Memorandum dated 14 October 1996 that "the Challenger
(Paircargo consortium) was found to have a combined net worth of P3,926,421,242.00 that
could support a project costing approximately P13 billion." To justify his conclusion, he
asserted: "It is not a requirement that the networth must be `unrestricted'. To impose this as
a requirement now will be nothing less than unfair."

He further opined, "(T)he networth reflected in the Financial Statement should not be taken
as the amount of money to be used to answer the required thirty (30%) percent equity of the
challenger but rather to be used in establishing if there is enough basis to believe that the
challenger can comply with the required 30% equity. In fact, proof of sufficient equity is
required as one of the conditions for award of contract (Sec. 12.1 of IRR of the BOT Law) but
not for prequalification (Sec. 5.4 of same document)."

On the basis of the foregoing dubious declaration, the Paircargo consortium was deemed
prequalified and thus permitted to proceed to the other stages of the bidding process.

By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's
findings in effect relieved the consortium of the need to comply with the financial capability
requirement imposed by the BOT Law and IRR. This position is unmistakably and squarely
at odds with the Supreme Court's consistent doctrine emphasizing the strict application of
pertinent rules, regulations and guidelines for the public bidding process, in order to place
each bidder - actual or potential - on the same footing. Thus, it is unarguably irregular and
contrary to the very concept of public bidding to permit a variance between the conditions
under which bids are invited and those under which proposals are submitted and approved.

Republic v. Capulong,14 teaches that if one bidder is relieved from having to conform to the
conditions that impose some duty upon it, that bidder is not contracting in fair competition
with those bidders that propose to be bound by all conditions. The essence of public bidding
is, after all, an opportunity for fair competition and a basis for the precise comparison of
bids.15 Thus, each bidder must bid under the same conditions; and be subject to the same
guidelines, requirements and limitations. The desired result is to be able to determine the
best offer or lowest bid, all things being equal.

Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30
percent of the minimum project cost, it should not have been prequalified or allowed to
participate further in the bidding. The Prequalification and Bidding Committee (PBAC) should
therefore not have opened the two envelopes of the consortium containing its technical and
financial proposals; required AEDC to match the consortium's bid; 16 or awarded the
Concession Agreement to the consortium's successor-in-interest, Piatco.

As there was effectively no public bidding to speak of, the entire bidding process having
been flawed and tainted from the very outset, therefore, the award of the concession to
Paircargo's successor Piatco was void, and the Concession Agreement executed with the
latter was likewise void ab initio. For this reason, Piatco cannot and should not be allowed to
benefit from that Agreement.17

AEDC Was Deprived of the Right to Match PIATCO's Price Challenge


In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared that, for purposes of
matching the price challenge of Piatco, AEDC as originator of the unsolicited proposal would
be permitted access only to the schedule of proposed Annual Guaranteed Payments
submitted by Piatco, and not to the latter's financial and technical proposals that constituted
the basis for the price challenge in the first place. This was supposedly in keeping with
Section 11.6 of the 1994 IRR, which provides that proprietary information is to be respected,
protected and treated with utmost confidentiality, and is therefore not to form part of the
bidding/tender and related documents.

This pronouncement, I believe, was a grievous misapplication of the mentioned provision.


The "proprietary information" referred to in Section 11.6 of the IRR pertains only to the
proprietary information of the originator of an unsolicited proposal, and not to those
belonging to a challenger. The reason for the protection accorded proprietary information at
all is the fact that, according to Section 4-A of the BOT Law as amended, a proposal qualifies
as an "unsolicited proposal" when it pertains to a project that involves "a new concept or
technology", and/or a project that is not on the government's list of priority projects.

To be considered as utilizing a new concept or technology, a project must involve the


possession of exclusive rights (worldwide or regional) over a process; or possession of
intellectual property rights over a design, methodology or engineering concept.18 Patently,
the intent of the BOT Law is to encourage individuals and groups to come up with creative
innovations, fresh ideas and new technology. Hence, the significance and necessity of
protecting proprietary information in connection with unsolicited proposals. And to make the
encouragement real, the law also extends to such individuals and groups what amounts to a
"right of first refusal" to undertake the project they conceptualized, involving the use of new
technology or concepts, through the mechanism of matching a price challenge.

A competing bid is never just any figure conjured from out of the blue; it is arrived at after
studying economic, financial, technical and other, factors; it is likewise based on certain
assumptions as to the nature of the business, the market potentials, the probable demand for
the product or service, the future behavior of cost items, political and other risks, and so on.
It is thus self-evident that in order to be able to intelligently match a bid or price challenge, a
bidder must be given access to the assumptions and the calculations that went into crafting
the competing bid.

In this instance, the financial and technical proposals of Piatco would have provided AEDC
with the necessary information to enable it to make a reasonably informed matching bid. To
put it more simply, a bidder unable to access the competitor's assumptions will never figure
out how the competing bid came about; requiring him to "counter-propose" is like having him
shoot at a target in the dark while blindfolded.

By withholding from AEDC the challenger's financial and technical proposals containing the
critical information it needed, Undersecretary Cal actually and effectively deprived AEDC of
the ability to match the price challenge. One could say that AEDC did not have the benefit of
a "level playing field." It seems to me, though, that AEDC was actually shut out of the game
altogether.

At the end of the day, the bottom line is that the validity and the propriety of the award to
Piatco had been irreparably impaired.

Delayed Issuance of the Notice of Award Violated the BOT Law and the IRR
Section 9.5 of the IRR requires that the Notice of Award must indicate the time frame within
which the winner of the bidding (and therefore the prospective awardee) shall submit the
prescribed performance security, proof of commitment of equity contributions, and
indications of sources of financing (loans); and, in the case of joint ventures, an agreement
showing that the members are jointly and severally responsible for the obligations of the
project proponent under the contract.

The purpose of having a definite and firm timetable for the submission of the aforementioned
requirements is not only to prevent delays in the project implementation, but also to expose
and weed out unqualified proponents, who might have unceremoniously slipped through the
earlier prequalification process, by compelling them to put their money where their mouths
are, so to speak.

Nevertheless, this provision can be easily circumvented by merely postponing the actual
issuance of the Notice of Award, in order to give the favored proponent sufficient time to
comply with the requirements. Hence, to avert or minimize the manipulation of the post-
bidding process, the IRR not only set out the precise sequence of events occurring between
the completion of the evaluation of the technical bids and the issuance of the Notice of
Award, but also specified the timetables for each such event. Definite allowable extensions
of time were provided for, as were the consequences of a failure to meet a particular
deadline.

In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the
time the second-stage evaluation shall have been completed, the Committee must come to a
decision whether or not to award the contract and, within 7 days therefrom, the Notice of
Award must be approved by the head of agency or local government unit (LGU) concerned,
and its issuance must follow within another 7 days thereafter.

Section 9.2 of the IRR set the procedure applicable to projects involving substantial
government undertakings as follows: Within 7 days after the decision to award is made, the
draft contract shall be submitted to the ICC for clearance on a no-objection basis. If the draft
contract includes government undertakings already previously approved, then the
submission shall be for information only.

However, should there be additional or new provisions different from the original government
undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working
days to act thereon, and unless otherwise specified, its failure to act on the contract within
the specified time frame signifies that the agency or LGU may proceed with the award. The
head of agency or LGU shall approve the Notice of Award within seven days of the clearance
by the ICC on a no-objection basis, and the Notice itself has to be issued within seven days
thereafter.

The highly regulated time-frames within which the agents of government were to act evinced
the intent to impose upon them the duty to act expeditiously throughout the process, to the
end that the project be prosecuted and implemented without delay. This regulated scenario
was likewise intended to discourage collusion and substantially reduce the opportunity for
agents of government to abuse their discretion in the course of the award process.

Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays
occurred in the award process, as can be observed from the presentation made by the
counsel for public respondents,19 quoted hereinbelow:
"11 Dec. 1996 - The Paircargo Joint Venture was informed by the PBAC that AEDC
failed to match and that negotiations preparatory to Notice of Award should be
commenced. This was the decision to award that should have commenced the
running of the 7-day period to approve the Notice of Award, as per Section 9.1 of the
IRR, or to submit the draft contract to the ICC for approval conformably with Section
9.2.

"01 April 1997 - The PBAC resolved that a copy of the final draft of the Concession
Agreement be submitted to the NEDA for clearance on a no-objection basis. This
resolution came more than 3 months too late as it should have been made on the
20th of December 1996 at the latest.

"16 April 1997 - The PBAC resolved that the period of signing the Concession
Agreement be extended by 15 days.

"18 April 1997 - NEDA approved the Concession Agreement. Again this is more than
3 months too late as the NEDA's decision should have been released on the 16th of
January 1997 or fifteen days after it should have been submitted to it for review.

"09 July 1997 - The Notice of Award was issued to PIATCO. Following the provisions
of the IRR, the Notice of Award should have been issued fourteen days after NEDA's
approval, or the 28th of January 1997. In any case, even if it were to be assumed
that the release of NEDA's approval on the 18th of April was timely, the Notice of
Award should have been issued on the 9th of May 1997. In both cases, therefore, the
release of the Notice of Award occurred in a decidedly less than timely fashion."

This chronology of events bespeaks an unmistakable disregard, if not disdain, by the


persons in charge of the award process for the time limitations prescribed by the IRR. Their
attitude flies in the face of this Court's solemn pronouncement in Republic v. Capulong,20 that
"strict observance of the rules, regulations and guidelines of the bidding process is the only
safeguard to a fair, honest and competitive public bidding."

From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and
its IRR were repeatedly violated with unmitigated impunity - and by agents of government, no
less! On account of such violation, the award of the contract to Piatco, which undoubtedly
gained time and benefited from the delays, must be deemed null and void from the
beginning.

Further Amendments Resulted in a Substantially Different Contract, Awarded Without


Public Bidding

But the violations and desecrations did not stop there. After the PBAC made its decision on
December 11, 1996 to award the contract to Piatco, the latter negotiated changes to the
Contract bidded out and ended up with what amounts to a substantially new contract without
any public bidding. This Contract was subsequently further amended four more times
through negotiation and without any bidding. Thus, the contract actually executed between
Piatco and DOTC/MIAA on July 12, 1997 (the Concession Agreement or "CA") differed from
the contract bidded out (the draft concession agreement or "DCA") in the following very
significant respects:

1. The CA inserted stipulations creating a monopoly in favor of Piatco in the business


of providing airport-related services for international airlines and passengers.21
2. The CA provided that government is to answer for Piatco's unpaid loans and debts
(lumped under the term Attendant Liabilities) in the event Piatco fails to pay its senior
lenders.22

3. The CA provided that in case of termination of the contract due to the fault of
government, government shall pay all expenses that Piatco incurred for the project
plus the appraised value of the Terminal.23

4. The CA imposed new and special obligations on government, including delivery of


clean possession of the site for the terminal; acquisition of additional land at the
government's expense for construction of road networks required by Piatco's
approved plans and specifications; and assistance to Piatco in securing site utilities,
as well as all necessary permits, licenses and authorizations.24

5. Where Section 3.02 of the DCA requires government to refrain from competing
with the contractor with respect to the operation of NAIA Terminal III, Section 3.02(b)
of the CA excludes and prohibits everyone, including government, from directly or
indirectly competing with Piatco, with respect to the operation of, as well
as operations in, NAIA Terminal III. Operations in is sufficiently broad to encompass
all retail and other commercial business enterprises operating within Terminal III,
inclusive of the businesses of providing various airport-related services to
international airlines, within the scope of the prohibition.

6. Under Section 6.01 of the DCA, the following fees are subject to the written
approval of MIAA: lease/rental charges, concession privilege fees for passenger
services, food services, transportation utility concessions, groundhandling, catering
and miscellaneous concession fees, porterage fees, greeter/well-wisher fees,
carpark fees, advertising fees, VIP facilities fees and others. Moreover, adjustments
to the groundhandling fees, rentals and porterage fees are permitted only once every
two years and in accordance with a parametric formula, per DCA Section 6.03.
However, the CA as executed with Piatco provides in Section 6.06 that all the
aforesaid fees, rentals and charges may be adjusted without MIAA's approval or
intervention. Neither are the adjustments to these fees and charges subject to or
limited by any parametric formula.25

7. Section 1.29 of the DCA provides that the terminal fees, aircraft tacking fees,
aircraft parking fees, check-in counter fees and other fees are to be quoted and paid
in Philippine pesos. But per Section 1.33 of the CA, all the aforesaid fees save the
terminal fee are denominated in US Dollars.

8. Under Section 8.07 of the DCA, the term attendant liabilities refers to liabilities
pertinent to NAIA Terminal III, such as payment of lease rentals and performance of
other obligations under the Land Lease Agreement; the obligations under the Tenant
Agreements; and payment of all taxes, fees, charges and assessments of whatever
kind that may be imposed on NAIA Terminal III or parts thereof. But in Section 1.06
of the CA, Attendant Liabilities refers to unpaid debts of Piatco: "All amounts
recorded and from time to time outstanding in the books of (Piatco) as owing to
Unpaid Creditors who have provided, loaned or advanced funds actually used for the
Project, including all interests, penalties, associated fees, charges, surcharges,
indemnities, reimbursements and other related expenses, and further including
amounts owed by [Piatco] to its suppliers, contractors and subcontractors."
9. Per Sections 8.04 and 8.06 of the DCA, government may, on account of the
contractors breach, rescind the contract and select one of four options: (a) take over
the terminal and assume all its attendant liabilities; (b) allow the contractor's creditors
to assign the Project to another entity acceptable to DOTC/MIAA; (c) pay the
contractor rent for the facilities and equipment the DOTC may utilize; or (d) purchase
the terminal at a price established by independent appraisers. Depending on the
option selected, government may take immediate possession and control of the
terminal and its operations. Government will be obligated to compensate the
contractor for the "equivalent or proportionate contract costs actually disbursed," but
only where government is the one in breach of the contract. But under Section
8.06(a) of the CA, whether on account of Piatco's breach of contract or its inability to
pay its creditors, government is obliged to either (a) take over Terminal III and
assume all of Piatco's debts or (b) permit the qualified unpaid creditors to be
substituted in place of Piatco or to designate a new operator. And in the event of
government's breach of contract, Piatco may compel it to purchase the terminal at
fair market value, per Section 8.06(b) of the CA.

10. Under the DCA, any delay by Piatco in the payment of the amounts due the
government constitutes breach of contract. However, under the CA, such delay does
not necessarily constitute breach of contract, since Piatco is permitted to suspend
payments to the government in order to first satisfy the claims of its secured
creditors, per Section 8.04(d) of the CA.

It goes without saying that the amendment of the Contract bidded out (the DCA or draft
concession agreement) - in such substantial manner, without any public bidding, and after
the bidding process had been concluded on December 11, 1996 - is violative of public policy
on public biddings, as well as the spirit and intent of the BOT Law. The whole point of going
through the public bidding exercise was completely lost. Its very rationale was totally
subverted by permitting Piatco to amend the contract for which public bidding had already
been concluded. Competitive bidding aims to obtain the best deal possible by fostering
transparency and preventing favoritism, collusion and fraud in the awarding of contracts.
That is the reason why procedural rules pertaining to public bidding demand strict
observance.26

In a relatively early case, Caltex v. Delgado Brothers,27 this Court made it clear that
substantive amendments to a contract for which a public bidding has already been finished
should only be awarded after another public bidding:

"The due execution of a contract after public bidding is a limitation upon the right of
the contracting parties to alter or amend it without another public bidding, for
otherwise what would a public bidding be good for if after the execution of a contract
after public bidding, the contracting parties may alter or amend the contract, or even
cancel it, at their will? Public biddings are held for the protection of the public, and to
give the public the best possible advantages by means of open competition between
the bidders. He who bids or offers the best terms is awarded the contract subject of
the bid, and it is obvious that such protection and best possible advantages to the
public will disappear if the parties to a contract executed after public bidding may
alter or amend it without another previous public bidding."28

The aforementioned case dealt with the unauthorized amendment of a contract executed
after public bidding; in the situation before us, the amendments were made also after the
bidding, but prior to execution. Be that as it may, the same rationale underlying Caltex
applies to the present situation with equal force. Allowing the winning bidder to renegotiate
the contract for which the bidding process has ended is tantamount to permitting it to put in
anything it wants. Here, the winning bidder (Piatco) did not even bother to wait until after
actual execution of the contract before rushing to amend it. Perhaps it believed that if the
changes were made to a contract already won through bidding (DCA) instead of waiting until
it is executed, the amendments would not be noticed or discovered by the public.

In a later case, Mata v. San Diego,29 this Court reiterated its ruling as follows:

"It is true that modification of government contracts, after the same had been
awarded after a public bidding, is not allowed because such modification serves to
nullify the effects of the bidding and whatever advantages the Government had
secured thereby and may also result in manifest injustice to the other bidders. This
prohibition, however, refers to a change in vital and essential particulars of the
agreement which results in a substantially new contract."

Piatco's counter-argument may be summed up thus: There was nothing in the 1994 IRR that
prohibited further negotiations and eventual amendments to the DCA even after the bidding
had been concluded. In fact, PBAC Bid Bulletin No. 3 states: "[A]mendments to the Draft
Concession Agreement shall be issued from time to time. Said amendments will only cover
items that would not materially affect the preparation of the proponent's proposal."

I submit that accepting such warped argument will result in perverting the policy underlying
public bidding. The BOT Law cannot be said to allow the negotiation of contractual
stipulations resulting in a substantially new contract after the bidding process and price
challenge had been concluded. In fact, the BOT Law, in recognition of the time, money and
effort invested in an unsolicited proposal, accords its originator the privilege of matching the
challenger's bid.

Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing
bidder; and to the right of the original proponent "to match the price" of the challenger. Thus,
only the price proposals are in play. The terms, conditions and stipulations in the contract for
which public bidding has been concluded are understood to remain intact and not be subject
to further negotiation. Otherwise, the very essence of public bidding will be destroyed - there
will be no basis for an exact comparison between bids.

Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The
phrase amendments . . . from time to time refers only to those amendments to the draft
concession agreement issued by the PBAC prior to the submission of the price challenge; it
certainly does not include or permit amendments negotiated for and introduced after the
bidding process, has been terminated.

Piatco's Concession Agreement Was Further Amended, (ARCA) Again Without Public
Bidding

Not satisfied with the Concession Agreement, Piatco - once more without bothering with
public bidding - negotiated with government for still more substantial changes. The result
was the Amended and Restated Concession Agreement (ARCA) executed on November 26,
1998. The following changes were introduced:

1. The definition of Attendant Liabilities was further amended with the result that the
unpaid loans of Piatco, for which government may be required to answer, are no
longer limited to only those loans recorded in Piatco's books or loans whose
proceeds were actually used in the Terminal III project.30

2. Although the contract may be terminated due to breach by Piatco, it will not be
liable to pay the government any Liquidated Damages if a new operator is
designated to take over the operation of the terminal.31

3. The Liquidated Damages which government becomes liable for in case of its
breach of contract were substantially increased.32

4. Government's right to appoint a comptroller for Piatco in case the latter encounters
liquidity problems was deleted.33

5. Government is made liable for Incremental and Consequential Costs and Losses
in case it fails to comply or cause any third party under its direct or indirect control to
comply with the special obligations imposed on government.34

6. The insurance policies obtained by Piatco covering the terminal are now required
to be assigned to the Senior Lenders as security for the loans; previously, their
proceeds were to be used to repair and rehabilitate the facility in case of damage.35

7. Government bound itself to set the initial rate of the terminal fee, to be charged
when Terminal III begins operations, at an amount higher than US$20.36

8. Government waived its defense of the illegality of the contract and even agreed to
be liable to pay damages to Piatco in the event the contract was declared illegal.37

9. Even though government may be entitled to terminate the ARCA on account of


breach by Piatco, government is still liable to pay Piatco the appraised value of
Terminal III or the Attendant Liabilities, if the termination occurs before the In-Service
Date.38 This condition contravenes the BOT Law provision on termination
compensation.

10. Government is obligated to take the administrative action required for Piatco's
imposition, collection and application of all Public Utility Revenues.39 No such
obligation existed previously.

11. Government is now also obligated to perform and cause other persons and
entities under its direct or indirect control to perform all acts necessary to perfect the
security interests to be created in favor of Piatco's Senior Lenders.40 No such
obligation existed previously.

12. DOTC/MIAA's right of intervention in instances where Piatco's Non-Public Utility


Revenues become exorbitant or excessive has been removed.41

13. The illegality and unenforceability of the ARCA or any of its material provisions
was made an event of default on the part of government only, thus constituting a
ground for Piatco to terminate the ARCA.42
14. Amounts due from and payable by government under the contract were made
payable on demand - net of taxes, levies, imposts, duties, charges or fees of any
kind except as required by law.43

15. The Parametric Formula in the contract, which is utilized to compute for
adjustments/increases to the public utility revenues (i.e., aircraft parking and tacking
fees, check-in counter fee and terminal fee), was revised to permit Piatco to input its
more costly short-term borrowing rates instead of the longer-terms rates in the
computations for adjustments, with the end result that the changes will redound to its
greater financial benefit.

16. The Certificate of Completion simply deleted the successful performance-testing


of the terminal facility in accordance with defined performance standards as a pre-
condition for government's acceptance of the terminal facility.44

In sum, the foregoing revisions and amendments as embodied in the ARCA constitute very
material alterations of the terms and conditions of the CA, and give further manifestly undue
advantage to Piatco at the expense of government. Piatco claims that the changes to the CA
were necessitated by the demands of its foreign lenders. However, no proof whatsoever has
been adduced to buttress this claim.

In any event, it is quite patent that the sum total of the aforementioned changes resulted
in drastically weakening the position of government to a degree that seems quite excessive,
even from the standpoint of a businessperson who regularly transacts with banks and foreign
lenders, is familiar with their mind-set, and understands what motivates them. On the other
hand, whatever it was that impelled government officials concerned to accede to those
grossly disadvantageous changes, I can only hazard a guess.

There is no question in my mind that the ARCA was unauthorized and illegal for lack of
public bidding and for being patently disadvantageous to government.

The Three Supplements Imposed New Obligations on Government, Also Without Prior
Public Bidding

After Piatco had managed to breach the protective rampart of public bidding, it recklessly
went on a rampage of further assaults on the ARCA.

The First Supplement Is as Void as the ARCA

In the First Supplement ("FS") executed on August 27, 1999, the following changes were
made to the ARCA:

1. The amounts payable by Piatco to government were reduced by allowing


additional exceptions to the Gross Revenues in which government is supposed to
participate.45

2. Made part of the properties which government is obliged to construct and/or


maintain and keep in good repair are (a) the access road connecting Terminals II and
III - the construction of this access road is the obligation of Piatco, in lieu of its
obligation to construct an Access Tunnel connecting Terminals II and III; and (b) the
taxilane and taxiway - these are likewise part of Piatco's obligations, since they are
part and parcel of the project as described in Clause 1.3 of the Bid Documents .46

3. The MIAA is obligated to provide funding for the maintenance and repair of the
airports and facilities owned or operated by it and by third persons under its control. It
will also be liable to Piatco for the latter's losses, expenses and damages as well as
liability to third persons, in case MIAA fails to perform such obligations. In addition,
MIAA will also be liable for the incremental and consequential costs of the remedial
work done by Piatco on account of the former's default.47

4. The FS also imposed on government ten (10) "Additional Special Obligations,"


including the following:

(a) Working for the removal of the general aviation traffic from the NAIA
airport complex48

(b) Providing through MIAA the land required by Piatco for the taxilane and
one taxiway at no cost to Piatco49

(c) Implementing the government's existing storm drainage master plan50

(d) Coordinating with DPWH the financing, the implementation and the
completion of the following works before the In-Service Date: three left-
turning overpasses (EDSA to Tramo St., Tramo to Andrews Ave., and
Manlunas Road to Sales Ave.);51 and a road upgrade and improvement
program involving widening, repair and resurfacing of Sales Road, Andrews
Avenue and Manlunas Road; improvement of Nichols Interchange; and
removal of squatters along Andrews Avenue.52

(e) Dealing directly with BCDA and the Phil. Air Force in acquiring additional
land or right of way for the road upgrade and improvement program.53

5. Government is required to work for the immediate reversion to MIAA of


the Nayong Pilipino National Park.54

6. Government's share in the terminal fees collected was revised from a flat rate of
P180 to 36 percent thereof; together with government's percentage share in the
gross revenues of Piatco, the amount will be remitted to government in pesos instead
of US dollars.55 This amendment enables Piatco to benefit from the further erosion of
the peso-dollar exchange rate, while preventing government from building up its
foreign exchange reserves.

7. All payments from Piatco to government are now to be invoiced to MIAA, and
payments are to accrue to the latter's exclusive benefit.56 This move appears to be in
support of the funds MIAA advanced to DPWH.

I must emphasize that the First Supplement is void in two respects. First, it is merely an
amendment to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is
void, inexistent and not capable of being ratified or amended, it follows that the FS too is
void, inexistent and inoperative. Second, even assuming arguendo that the ARCA is
somehow remotely valid, nonetheless the FS, in imposing significant new obligations upon
government, altered the fundamental terms and stipulations of the ARCA, thus necessitating
a public bidding all over again. That the FS was entered into sans public bidding renders it
utterly void and inoperative.

The Second Supplement Is Similarly Void and Inexistent

The Second Supplement ("SS") was executed between the government and Piatco on
September 4, 2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but
as a public works contractor, to undertake - in the government's stead - the clearing,
removal, demolition and disposal of improvements, subterranean obstructions and waste
materials at the project site.57

The scope of the works, the procedures involved, and the obligations of the contractor are
provided for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid,
listing specific rates per cubic meter of materials for each phase of the work - excavation,
leveling, removal and disposal, backfilling and dewatering. The amounts collectible by Piatco
are to be offset against the Annual Guaranteed Payments it must pay government.

Though denominated as Second Supplement, it was nothing less than an entirely new public
works contract. Yet it, too, did not undergo any public bidding, for which reason it is also void
and inoperative.

Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm
reputedly owned by a former high-ranking DOTC official. But that is another story altogether.

The Third Supplement Is Likewise Void and Inexistent

The Third Supplement ("TS"), executed between the government and Piatco on June 22,
2001, passed on to the government certain obligations of Piatco as Terminal III
concessionaire, with respect to the surface road connecting Terminals II and III.

By way of background, at the inception of and forming part of the NAIA Terminal III project
was the proposed construction of an access tunnel crossing Runway 13/31, which. would
connect Terminal III to Terminal II. The Bid Documents in Section 4.1.2.3[B][i] declared that
the said access tunnel was subject to further negotiation; but for purposes of the bidding, the
proponent should submit a bid for it as well. Therefore, the tunnel was supposed to be part
and parcel of the Terminal III project.

However, in Section 5 of the First Supplement, the parties declared that the access tunnel
was not economically viable at that time. In lieu thereof, the parties agreed that a surface
access road (now called the T2-T3 Road) was to be constructed by Piatco to connect the two
terminals. Since it was plainly in substitution of the tunnel, the surface road construction
should likewise be considered part and parcel of the same project, and therefore part of
Piatco's obligation as well. While the access tunnel was estimated to cost about P800
million, the surface road would have a price tag in the vicinity of about P100 million, thus
producing significant savings for Piatco.

Yet, the Third Supplement, while confirming that Piatco would construct the T2-T3 Road,
nevertheless shifted to government some of the obligations pertaining to the former, as
follows:
1. Government is now obliged to remove at its own expense all tenants, squatters,
improvements and/or waste materials on the site where the T2-T3 road is to be
constructed.58 There was no similar obligation on the part of government insofar as
the access tunnel was concerned.

2. Should government fail to carry out its obligation as above described, Piatco may
undertake it on government's behalf, subject to the terms and conditions (including
compensation payments) contained in the Second Supplement.59

3. MIAA will answer for the operation, maintenance and repair of the T2-T3 Road.60

The TS depends upon and is intended to supplement the ARCA as well as the First
Supplement, both of which are void and inexistent and not capable of being ratified or
amended. It follows that the TS is likewise void, inexistent and inoperative. And even if,
hypothetically speaking, both ARCA and FS are valid, still, the Third Supplement - imposing
as it does significant new obligations upon government - would in effect alter the terms and
stipulations of the ARCA in material respects, thus necessitating another public bidding.
Since the TS was not subjected to public bidding, it is consequently utterly void as well. At
any rate, the TS created new monetary obligations on the part of government, for which
there were no prior appropriations. Hence it follows that the same is void ab initio.

In patiently tracing the progress of the Piatco contracts from their inception up to the present,
I noted that the whole process was riddled with significant lapses, if not outright irregularity
and wholesale violations of law and public policy. The rationale of beginning at the
beginning, so to speak, will become evident when the question of what to do with the five
Piatco contracts is discussed later on.

In the meantime, I shall take up specific, provisions or changes in the contracts and highlight
the more prominent objectionable features.

Government Directly Guarantees Piatco Debts

Certainly the most discussed provision in the parties' arguments is the one creating an
unauthorized, direct government guarantee of Piatco's obligations in favor of the lenders.

Section 4-A of the BOT Law as amended states that unsolicited proposals, such as the NAIA
Terminal III Project, may be accepted by government provided inter alia that no
direct government guarantee, subsidy or equity is required. In short, such guarantee is
prohibited in unsolicited proposals. Section 2(n) of the same legislation defines direct
government guarantee as "an agreement whereby the government or any of its agencies or
local government units (will) assume responsibility for the repayment of debt directly incurred
by the project proponent in implementing the project in case of a loan default."

Both the CA and the ARCA have provisions that undeniably create such prohibited
government guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to Section
4.04 of the CA, provides thus:

"(iv) that if Concessionaire is in default under a payment obligation owed to the


Senior Lenders, and as a result thereof the Senior Lenders have become entitled to
accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of
the same . . .;
(v) . . . the Senior Lenders may after written notification to GRP, transfer the
Concessionaire's rights and obligations to a transferee . . .;

(vi) if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP and
the Senior Lenders shall endeavor . . . to enter into any other arrangement relating to
the Development Facility . . . If no agreement relating to the Development Facility is
arrived at by GRP and the Senior Lenders within the said 180-day period, then at the
end thereof the Development Facility shall be transferred by the Concessionaire to
GRP or its designee and GRP shall make a termination payment to Concessionaire
equal to the Appraised Value (as hereinafter defined) of the Development Facility or
the sum of the Attendant Liabilities, if greater. . . ."

In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA as follows:

"Attendant Liabilities refer to all amounts in each case supported by verifiable


evidence from time to time owed or which may become, owing by Concessionaire to
Senior Lenders or any other persons or entities who have provided, loaned or
advanced funds or provided financial facilities to Concessionaire for the Project,
including, without limitation, all principal, interest, associated fees, charges,
reimbursements, and other related expenses (including the fees, charges and
expenses of any agents or trustees of such persons or entities), whether payable at
maturity, by acceleration or otherwise, and further including amounts owed by
Concessionaire to its professional consultants and advisers, suppliers, contractors
and sub-contractors."

Government's agreement to pay becomes effective in the event of a default by Piatco on


any of its loan obligations to the Senior Lenders, and the amount to be paid by government
is the greater of either the Appraised Value of Terminal III or the aggregate amount of the
moneys owed by Piatco - whether to the Senior Lenders or to other entities, including its
suppliers, contractors and subcontractors. In effect, therefore, this agreement already
constitutes the prohibited assumption by government of responsibility for repayment of
Piatco's debts in case of a loan default. In fine, a direct government guarantee.

It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and
(vi) that would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to
transfer Piatco's rights to a transferee of their choice; and, second, an effort (equally
unsuccessful) to "enter into any other arrangement" with the government regarding the
Terminal III facility, before government is required to make good on its guarantee. What is
abundantly clear is the fact that, in the devious labyrinthine process detailed in the aforesaid
section, it is entirely within the Senior Lenders' power, prerogative and control - exercisable
via a mere refusal or inability to agree upon "a transferee" or "any other arrangement"
regarding the terminal facility - to push the process forward to the ultimate contractual cul-de-
sac, wherein government will be compelled to abjectly surrender and make good on its
guarantee of payment.

Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in
the event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of
ARCA speaks of government making the termination payment to Piatco, not to the lenders.
However, it is almost a certainty that the Senior Lenders will already have made Piatco sign
over to them, ahead of time, its right to receive such payments from government; and/or they
may already have had themselves appointed its attorneys-in-fact for the purpose of collecting
and receiving such payments.
Nevertheless, as petitioners-in-intervention pointed out in their Memorandum,61 the
termination payment is to be made to Piatco, not to the lenders; and there is no provision
anywhere in the contract documents to prevent it from diverting the proceeds to its own
benefit and/or to ensure that it will necessarily use the same to pay off the Senior Lenders
and other creditors, in order to avert the foreclosure of the mortgage and other liens on the
terminal facility. Such deficiency puts the interests of government at great risk. Indeed, if the
unthinkable were to happen, government would be paying several hundreds of millions of
dollars, but the mortgage liens on the facility may still be foreclosed by the Senior Lenders
just the same.

Consequently, the Piatco contracts are also objectionable for grievously failing to adequately
protect government's interests. More accurately, the contracts would consistently weaken
and do away with protection of government interests. As such, they are therefore grossly
lopsided in favor of Piatco and/or its Senior Lenders.

While on this subject, it is well to recall the earlier discussion regarding a particularly
noticeable alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA
defining the term, the Piatco debts to be assumed/paid by government were qualified by the
phrases recorded and from time to time outstanding in the books of the
Concessionaire and actually used for the project. These phrases were eliminated from the
ARCA's definition of Attendant Liabilities.

Since no explanation has been forthcoming from Piatco as to the possible justification for
such a drastic change, the only conclusion, possible is that it intends to have all of its debts
covered by the guarantee, regardless of whether or not they are disclosed in its books. This
has particular reference to those borrowings which were obtained in violation of the loan
covenants requiring Piatco to maintain a minimum 70:30 debt-to-equity ratio, and even if the
loan proceeds were not actually used for the project itself.

This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount
which government has guaranteed to pay as termination payment is the greater of either (i)
the Appraised Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities.
Given that the Attendant Liabilities may include practically any Piatco debt under the sun, it is
highly conceivable that their sum may greatly exceed the appraised value of the facility, and
government may end up paying very much more than the real worth of Terminal III. (So why
did government have to bother with public bidding anyway?)

In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the
spirit and the intent of the BOT Law. The law meant to mobilize private resources (the private
sector) to take on the burden and the risks of financing the construction, operation and
maintenance of relevant infrastructure and development projects for the simple reason that
government is not in a position to do so. By the same token, government guarantee was
prohibited, since it would merely defeat the purpose and raison d'être of a build-operate-and-
transfer project to be undertaken by the private sector.

To the extent that the project proponent is able to obtain loans to fund the project, those risks
are shared between the project proponent on the one hand, and its banks and other lenders
on the other. But where the proponent or its lenders manage to cajol or coerce the
government into extending a guarantee of payment of the loan obligations, the risks
assumed by the lenders are passed right back to government. I cannot understand why, in
the instant case, government cheerfully assented to re-assuming the risks of the project
when it gave the prohibited guarantee and thus simply negated the very purpose of the BOT
Law and the protection it gives the government.

Contract Termination Provisions in the Piatco Contracts Are Void

The BOT Law as amended provides for contract termination as follows:

"Sec. 7. Contract Termination. - In the event that a project is revoked, cancelled or


terminated by the government through no fault of the project proponent or by mutual
agreement, the Government shall compensate the said project proponent for its
actual expenses incurred in the project plus a reasonable rate of return thereon not
exceeding that stated in the contract as of the date of such revocation, cancellation
or termination: Provided, That the interest of the Government in this instances [sic]
shall be duly insured with the Government Service Insurance System or any other
insurance entity duly accredited by the Office of the Insurance
Commissioner: Provided, finally, That the cost of the insurance coverage shall be
included in the terms and conditions of the bidding referred to above.

"In the event that the government defaults on certain major obligations in the contract
and such failure is not remediable or if remediable shall remain unremedied for an
unreasonable length of time, the project proponent/contractor may, by prior notice to
the concerned national government agency or local government unit specifying the
turn-over date, terminate the contract. The project proponent/contractor shall be
reasonably compensated by the Government for equivalent or proportionate contract
cost as defined in the contract."

The foregoing statutory provision in effect provides for the following limited instances when
termination compensation may be allowed:

1. Termination by the government through no fault of the project proponent

2. Termination upon the parties' mutual agreement

3. Termination by the proponent due to government's default on certain major


contractual obligations

To emphasize, the law does not permit compensation for the project proponent when
contract termination is due to the proponent's own fault or breach of contract.

This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that
government is to pay termination compensation to Piatco even when termination is initiated
by government for the following causes:

"(i) Failure of Concessionaire to finish the Works in all material respects in


accordance with the Tender Design and the Timetable;

(ii) Commission by Concessionaire of a material breach of this Agreement . . .;

(iii) . . . a change in control of Concessionaire arising from the sale, assignment,


transfer or other disposition of capital stock which results in an ownership structure
violative of statutory or constitutional limitations;
(iv) A pattern of continuing or repeated non-compliance, willful violation, or non-
performance of other terms and conditions hereof which is hereby deemed a material
breach of this Agreement . . ."62

As if that were not bad enough, the ARCA also inserted into Section 8.01 the phrase
"Subject to Section 4.04." The effect of this insertion is that in those instances where
government may terminate the contract on account of Piatco's breach, and it is nevertheless
required under the ARCA to make termination compensation to Piatco even though
unauthorized by law, such compensation is to be equivalent to the payment amount
guaranteed by government - either a) the Appraised Value of the terminal facility or (b) the
aggregate of the Attendant Liabilities, whichever amount is greater!

Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a
project proponent to recover the actual expenses it incurred in the prosecution of the project
plus a reasonable rate of return not in excess of that provided in the contract; or to be
compensated for the equivalent or proportionate contract cost as defined in the contract, in
case the government is in default on certain major contractual obligations.

Furthermore, in those instances where such termination compensation is authorized by the


BOT Law, it is indispensable that the interest of government be duly insured. Section 5.08
the ARCA mandates insurance coverage for the terminal facility; but all insurance policies
are to be assigned, and all proceeds are payable, to the Senior Lenders. In brief, the interest
being secured by such coverage is that of the Senior Lenders, not that of government. This
can hardly be considered compliance with law.

In essence, the ARCA provisions on termination compensation result in another


unauthorized government guarantee, this time in favor of Piatco.

A Prohibited Direct Government Subsidy, Which at the Same Time Is an Assault on


the National Honor

Still another contractual provision offensive to law and public policy is Section 8.01(d) of the
ARCA, which is a "bolder and badder" version of Section 8.04(d) of the CA.

It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct
government guarantees, but likewise a direct government subsidy for unsolicited proposals.
Section 13.2. b. iii. of the 1999 IRR defines a direct government subsidy as encompassing
"an agreement whereby the Government . . . will . . . postpone any payments due from the
proponent."

Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus:

"(d) The provisions of Section 8.01(a) notwithstanding, and for the purpose of
preventing a disruption of the operations in the Terminal and/or Terminal Complex, in
the event that at any time Concessionaire is of the reasonable opinion that it shall be
unable to meet a payment obligation owed to the Senior Lenders, Concessionaire
shall give prompt notice to GRP, through DOTC/MIAA and to the Senior Lenders. In
such circumstances, the Senior Lenders (or the Senior Lenders' Representative) may
ensure that after making provision for administrative expenses and depreciation, the
cash resources of Concessionaire shall first be used and applied to meet all payment
obligations owed to the Senior Lenders. Any excess cash, after meeting such
payment obligations, shall be earmarked for the payment of all sums payable by
Concessionaire to GRP under this Agreement. If by reason of the foregoing GRP
should be unable to collect in full all payments due to GRP under this Agreement,
then the unpaid balance shall be payable within a 90-day grace period counted from
the relevant due date, with interest per annum at the rate equal to the average 91-
day Treasury Bill Rate as of the auction date immediately preceding the relevant due
date. If payment is not effected by Concessionaire within the grace period, then a
spread of five (5%) percent over the applicable 91-day Treasury Bill Rate shall be
added on the unpaid amount commencing on the expiry of the grace period up to the
day of full payment. When the temporary illiquidity of Concessionaire shall have been
corrected and the cash position of Concessionaire should indicate its ability to meet
its maturing obligations, then the provisions set forth under this Section 8.01(d) shall
cease to apply. The foregoing remedial measures shall be applicable only while there
remains unpaid and outstanding amounts owed to the Senior Lenders." (Emphasis
supplied)

By any manner of interpretation or application, Section 8.01(d) of the ARCA clearly


mandates the indefinitepostponement of payment of all of Piatco's obligations to the
government, in order to ensure that Piatco's obligations to the Senior Lenders are paid in full
first. That is nothing more or less than the direct government subsidy prohibited by the BOT
Law and the IRR. The fact that Piatco will pay interest on the unpaid amounts owed to
government does not change the situation or render the prohibited subsidy any less
unacceptable.

But beyond the clear violations of law, there are larger issues involved in the ARCA. Earlier, I
mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section
8.04(d) of the CA which gave government the right to appoint a financial controller to
manage the cash position of Piatco during situations of financial distress. Not only has
government been deprived of any means of monitoring and managing the situation; worse,
as can be seen from Section 8.01(d) above-quoted, the Senior Lenders have effectively
locked in on the right to exercise financial controllership over Piatco and to allocate its cash
resources to the payment of all amounts owed to the Senior Lenders before allowing any
payment to be made to government.

In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the
power and the authority to determine how much (if at all) and when the Philippine
government (as grantor of the franchise) may be allowed to receive from Piatco. In that
situation, government will be at the mercy of the foreign lenders. This is a situation
completely contrary to the rationale of the BOT Law and to public policy.

The aforesaid provision rouses mixed emotions - shame and disgust at the parties'
(especially the government officials') docile submission and abject servitude and
surrender to the imperious and excessive demands of the foreign lenders, on the one
hand; and vehement outrage at the affront to the sovereignty of the Republic and to
the national honor, on the other. It is indeed time to put an end to such an unbearable,
dishonorable situation.

The Piatco Contracts Unarguably Violate Constitutional Injunctions

I will now discuss the manner in which the Piatco Contracts offended the Constitution.

The Exclusive Right Granted to Piatco to Operate a Public Utility Is Prohibited by the
Constitution
While Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to operate and
maintain the Terminal Complex," Section 3.02(a) of the same ARCA granted to Piatco, for
the entire term of the concession agreement, "the exclusive right to operate a commercial
international passenger terminal within the Island of Luzon" with the exception of those three
terminals already existing63 at the time of execution of the ARCA.

Section 11 of Article XII of the Constitution prohibits the grant of a "franchise, certificate, or
any other form of authorization for the operation of a public utility" that is "exclusive in
character."

In its Opinion No. 078, Series of 1995, the Department of justice held that "the NAIA
Terminal III which . . . is a 'terminal for public use' is a public utility." Consequently, the
constitutional prohibition against the exclusivity of a franchise applies to the franchise for the
operation of NAIA Terminal III as well.

What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate
an international passenger terminal within the "Island of Luzon." What this grant effectively
means is that the government is now estopped from exercising its inherent power to award
any other person another franchise or a right to operate such a public utility, in the event
public interest in Luzon requires it. This restriction is highly detrimental to government and to
the public interest. Former Secretary of Justice Hernando B. Perez expressed this point well
in his Memorandum for the President dated 21 May 2002:

"Section 3.02 on 'Exclusivity'

"This provision gives to PIATCO (the Concessionaire) the exclusive right to operate a
commercial international airport within the Island of Luzon with the exception of those
already existing at the time of the execution of the Agreement, such as the airports at
Subic, Clark and Laoag City. In the case of the Clark International Airport, however,
the provision restricts its operation beyond its design capacity of 850,000 passengers
per annum and the operation of new terminal facilities therein until after the new
NAIA Terminal III shall have consistently reached or exceeded its design capacity of
ten (10) million passenger capacity per year for three (3) consecutive years during
the concession period.

"This is an onerous and disadvantageous provision. It effectively grants PIATCO


a monopoly in Luzon and ties the hands of government in the matter of developing
new airports which may be found expedient and necessary in carrying out any future
plan for an inter-modal transportation system in Luzon.

"Additionally, it imposes an unreasonable restriction on the operation of the Clark


International Airport which could adversely affect the operation and development of
the Clark Special Economic Zone to the economic prejudice of the local
constituencies that are being benefited by its operation." (Emphasis supplied)

While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute
a monopoly on account of the very nature of its business and the absence of competition,
such a situation does not however constitute justification to violate the constitutional
prohibition and grant an exclusive franchise or exclusive right to operate a public utility.

Piatco's contention that the Constitution does not actually prohibit monopolies is beside the
point. As correctly argued,64 the existence of a monopoly by a public utility is a situation
created by circumstances that do not encourage competition. This situation is different from
the grant of a franchise to operate a public utility, a privilege granted by government. Of
course, the grant of a franchise may result in a monopoly. But making such
franchise exclusive is what is expressly proscribed by the Constitution.

Actually, the aforementioned Section 3.02 of the ARCA more than just guaranteed
exclusivity; it also guaranteed that the government will not improve or expand the facilities at
Clark - and in fact is required to put a cap on the latter's operations - until after Terminal III
shall have been operated at or beyond its peak capacity for three consecutive years.65 As
counsel for public respondents pointed out, in the real world where the rate of influx of
international passengers can fluctuate substantially from year to year, it may take many
years before Terminal III sees three consecutive years' operations at peak capacity. The
Diosdado Macapagal International Airport may thus end up stagnating for a long time.
Indeed, in order to ensure greater profits for Piatco, the economic progress of a region has
had to be sacrificed.

The Piatco Contracts Violate the Time Limitation on Franchises

Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any
other form of authorization for the operation of a public utility shall be . . . for a longer period
than fifty years." After all, a franchise held for an unreasonably long time would likely give
rise to the same evils as a monopoly.

The Piatco Contracts have come up with an innovative way to circumvent the prohibition and
obtain an extension. This fact can be gleaned from Section 8.03(b) of the ARCA, which I
quote thus:

"Sec. 8.03. Termination Procedure and Consequences of Termination. -

a) x x x xxx xxx

b) In the event the Agreement is terminated pursuant to Section 8.01 (b)


hereof, Concessionaire shall be entitled to collect the Liquidated Damages
specified in Annex 'G'. The full payment by GRP to Concessionaire of the
Liquidated Damages shall be a condition precedent to the transfer by
Concessionaire to GRP of the Development Facility. Prior to the full payment
of the Liquidated Damages, Concessionaire shall to the extent practicable
continue to operate the Terminal and the Terminal Complex and shall be
entitled to retain and withhold all payments to GRP for the purpose of
offsetting the same against the Liquidated Damages. Upon full payment of
the Liquidated Damages, Concessionaire shall immediately transfer the
Development Facility to GRP on 'as-is-where-is' basis."

The aforesaid easy payment scheme is less beneficial than it first appears. Although it
enables government to avoid having to make outright payment of an obligation that will likely
run into billions of pesos, this easy payment plan will nevertheless cost government
considerable loss of income, which it would earn if it were to operate Terminal III by itself.
Inasmuch as payments to the concessionaire (Piatco) will be on "installment basis," interest
charges on the remaining unpaid balance would undoubtedly cause the total outstanding
balance to swell. Piatco would thus be entitled to remain in the driver's seat and keep
operating the terminal for an indefinite length of time.
The Contracts Create Two Monopolies for Piatco

By way of background, two monopolies were actually created by the Piatco contracts. The
first and more obvious one refers to the business of operating an international passenger
terminal in Luzon, the business end of which involves providing international airlines with
parking space for their aircraft, and airline passengers with the use of departure and arrival
areas, check-in counters, information systems, conveyor systems, security equipment and
paraphernalia, immigrations and customs processing areas; and amenities such as comfort
rooms, restaurants and shops.

In furtherance of the first monopoly, the Piatco Contracts stipulate that the NAIA Terminal III
will be the only facility to be operated as an international passenger terminal;66 that NAIA
Terminals I and II will no longer be operated as such;67 and that no one (including the
government) will be allowed to compete with Piatco in the operation of an international
passenger terminal in the NAIA Complex.68 Given that, at this time, the government and
Piatco are the only ones engaged in the business of operating an international passenger
terminal, I am not acutely concerned with this particular monopolistic situation.

There was however another monopoly within the NAIA created by the subject contracts for
Piatco - in the business of providing international airlines with the following: groundhandling,
in-flight catering, cargo handling, and aircraft repair and maintenance services. These are
lines of business activity in which are engaged many service providers (including the
petitioners-in-intervention), who will be adversely affected upon full implementation of the
Piatco Contracts, particularly Sections 3.01(d)69 and (e)70 of both the ARCA and the CA.

On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only international
passenger terminal at the NAIA, and therefore the only place within the NAIA Complex
where the business of providing airport-related services to international airlines may be
conducted. On the other hand, Section 3.01(d) of the ARCA requires government, through
the MIAA, not to allow service providers with expired MIAA contracts to renew or extend their
contracts to render airport-related services to airlines. Meanwhile, Section 3.01(e) of the
ARCA requires government, through the DOTC and MIAA, not to allow service providers -
those with subsisting concession agreements for services and operations being conducted at
Terminal I - to carry over their concession agreements, services and operations to Terminal
III, unless they first enter into a separate agreement with Piatco.

The aforementioned provisions vest in Piatco effective and exclusive control over which
service provider may and may not operate at Terminal III and render the airport-related
services needed by international airlines. It thereby possesses the power to exclude
competition. By necessary implication, it also has effective control over the fees and charges
that will be imposed and collected by these service providers.

This intention is exceedingly clear in the declaration by Piatco that it is "completely within its
rights to exclude any party that it has not contracted with from NAIA Terminal III."71

Worse, there is nothing whatsoever in the Piatco Contracts that can serve to restrict, control
or regulate the concessionaire's discretion and power to reject any service provider and/or
impose any term or condition it may see fit in any contract it enters into with a service
provider. In brief, there is no safeguard whatsoever to ensure free and fair competition in the
service-provider sector.
In the meantime, and not surprisingly, Piatco is first in line, ready to exploit the unique
business opportunity. It announced72 that it has accredited three groundhandlers for Terminal
III. Aside from the Philippine Airlines, the other accredited entities are the Philippine Airport
and Ground Services Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems,
Inc. ("Orbit"). PAGSGlobeground is a wholly-owned subsidiary of the Philippine Airport and
Ground Services, Inc. or PAGS,73 while Orbit is a wholly-owned subsidiary of Friendship
Holdings, Inc.,74 which is in turn owned 80 percent by PAGS.75 PAGS is a service provider
owned 60 percent by the Cheng Family;76 it is a stockholder of 35 percent of Piatco77 and is
the latter's designated contractor-operator for NAIA Terminal III.78

Such entry into and domination of the airport-related services sector appear to be very much
in line with the following provisions contained in the First Addendum to the Piatco
Shareholders Agreement,79 executed on July 6, 1999, which appear to constitute a sort of
master plan to create a monopoly and combinations in restraint of trade:

"11. The Shareholders shall ensure:

a. x x x xxx x x x.;

b. That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated
Affiliates shall, at all times during the Concession Period, be exclusively authorized
by (PIATCO) to engage in the provision of ground-handling, catering and fueling
services within the Terminal Complex.

c. That PAIRCARGO and/or its designated Affiliate shall, during the Concession
Period, be the only entities authorized to construct and operate a warehouse for all
cargo handling and related services within the Site."

Precisely, proscribed by our Constitution are the monopoly and the restraint of trade being
fostered by the Piatco Contracts through the erection of barriers to the entry of other service
providers into Terminal III. In Tatad v. Secretary of the Department of Energy,80 the Court
ruled:

". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State shall
regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed.'

"A monopoly is a privilege or peculiar advantage vested in one or more persons or


companies, consisting in the exclusive right or power to carry on a particular
business or trade, manufacture a particular article, or control the sale or the whole
supply of a particular commodity. It is a form of market structure in which one or only
a few firms dominate the total sales of a product or service. On the other hand, a
combination in restraint of trade is an agreement or understanding between two or
more persons, in the form of a contract, trust, pool, holding company, or other form of
association, for the purpose of unduly restricting competition, monopolizing trade and
commerce in a certain commodity, controlling its production, distribution and price, or
otherwise interfering with freedom of trade without statutory authority. Combination in
restraint of trade refers to the means while monopoly refers to the end.

"x x x xxx xxx


"Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It
espouses competition. The desirability of competition is the reason for the prohibition
against restraint of trade, the reason for the interdiction of unfair competition, and the
reason for regulation of unmitigated monopolies. Competition is thus the underlying
principle of [S]ection 19, Article XII of our Constitution, . . ."81

Gokongwei Jr. v. Securities and Exchange Commission82 elucidates the criteria to be


employed: "A 'monopoly' embraces any combination the tendency of which is to prevent
competition in the broad and general sense, or to control prices to the detriment of the public.
In short, it is the concentration of business in the hands of a few. The material consideration
in determining its existence is not that prices are raised and competition actually excluded,
but that power exists to raise prices or exclude competition when desired."83 (Emphasis
supplied)

The Contracts Encourage Monopolistic Pricing, Too

Aside from creating a monopoly, the Piatco contracts also give the concessionaire virtually
limitless power over the charging of fees, rentals and so forth. What little "oversight function"
the government might be able and minded to exercise is less than sufficient to protect the
public interest, as can be gleaned from the following provisions:

"Sec. 6.06. Adjustment of Non-Public Utility Fees and Charges

"For fees, rentals and charges constituting Non-Public Utility Revenues,


Concessionaire may make any adjustments it deems appropriate without need for
the consent of GRP or any government agency subject to Sec. 6.03(c)."

Section 6.03(c) in turn provides:

"(c) Concessionaire shall at all times be judicious in fixing fees and charges
constituting Non-Public Utility Revenues in order to ensure that End Users are not
unreasonably deprived of services. While the vehicular parking fee, porterage fee
and greeter/wellwisher fee constitute Non-Public Utility Revenues of Concessionaire,
GRP may require Concessionaire to explain and justify the fee it may set from time to
time, if in the reasonable opinion of GRP the said fees have become exorbitant
resulting in the unreasonable deprivation of End Users of such services."

It will be noted that the above-quoted provision has no teeth, so the concessionaire can defy
the government without fear of any sanction. Moreover, Section 6.06 - taken together with
Section 6.03(c) of the ARCA - falls short of the standard set by the BOT Law as amended,
which expressly requires in Section 2(b) that the project proponent is "allowed to charge
facility users appropriate tolls, fees, rentals and charges not exceeding those proposed in
its bid or as negotiated and incorporated in the contract x x x."

The Piatco Contracts Violate Constitutional Prohibitions Against


Impairment of Contracts and Deprivation of Property Without Due Process

Earlier, I discussed how Section 3.01(e)84 of both the CA and the ARCA requires
government, through DOTC/MIAA, not to permit the carry-over to Terminal III of the services
and operations of certain service providers currently operating at Terminal I with subsisting
contracts.
By the In-Service Date, Terminal III shall be the only facility to be operated as an
international passenger terminal at the NAIA;85 thus, Terminals I and II shall no longer
operate as such,86 and no one shall be allowed to compete with Piatco in the operation of an
international passenger terminal in the NAIA.87 The bottom line is that, as of the In-Service
Date, Terminal III will be the only terminal where the business of providing airport-related
services to international airlines and passengers may be conducted at all.

Consequently, government through the DOTC/MIAA will be compelled to cease honoring


existing contracts with service providers after the In-Service Date, as they cannot be allowed
to operate in Terminal III.

In short, the CA and the ARCA obligate and constrain government to break its existing
contracts with these service providers.

Notably, government is not in a position to require Piatco to accommodate the displaced


service providers, and it would be unrealistic to think that these service providers can
perform their service contracts in some other international airport outside Luzon. Obviously,
then, these displaced service providers are - to borrow a quaint expression - up the river
without a paddle. In plainer terms, they will have lost their businesses entirely, in the blink of
an eye.

What we have here is a set of contractual provisions that impair the obligation of contracts
and contravene the constitutional prohibition against deprivation of property without due
process of law.88

Moreover, since the displaced service providers, being unable to operate, will be forced to
close shop, their respective employees - among them Messrs. Agan and Lopez et al. - have
very grave cause for concern, as they will find themselves out of employment and bereft of
their means of livelihood. This situation comprises still another violation of the constitution
prohibition against deprivation of property without due process.

True, doing business at the NAIA may be viewed more as a privilege than as a right.
Nonetheless, where that privilege has been availed of by the petitioners-in-intervention
service providers for years on end, a situation arises, similar to that in American Inter-fashion
v. GTEB.89 We held therein that a privilege enjoyed for seven years "evolved into some form
of property right which should not be removed x x x arbitrarily and without due process." Said
pronouncement is particularly relevant and applicable to the situation at bar because the
livelihood of the employees of petitioners-intervenors are at stake.

The Piatco Contracts Violate Constitutional Prohibition


Against Deprivation of Liberty Without Due Process

The Piatco Contracts by locking out existing service providers from entry into Terminal III and
restricting entry of future service providers, thereby infringed upon the freedom - guaranteed
to and heretofore enjoyed by international airlines - to contract with local service providers of
their choice, and vice versa.

Both the service providers and their client airlines will be deprived of the right to liberty, which
includes the right to enter into all contracts,90 and/or the right to make a contract in relation to
one's business.91
By Creating New Financial Obligations for Government,
Supplements to the ARCA Violate the Constitutional
Ban on Disbursement of Public Funds Without Valid Appropriation

Clearly prohibited by the Constitution is the disbursement of public funds out of the treasury,
except in pursuance of an appropriation made by law.92 The immediate effect of this
constitutional ban is that all the various agencies of government are constrained to limit their
expenditures to the amounts appropriated by law for each fiscal year; and to carefully count
their cash before taking on contractual commitments. Giving flesh and form to the injunction
of the fundamental law, Sections 46 and 47 of Executive Order 292, otherwise known as the
Administrative Code of 1987, provide as follows:

"Sec. 46. Appropriation Before Entering into Contract. - (1) No contract involving the
expenditure of public funds shall be entered into unless there is an appropriation
therefor, the unexpended balance of which, free of other obligations, is sufficient to
cover the proposed expenditure; and . .

"Sec. 47. Certificate Showing Appropriation to Meet Contract. - Except in the case of
a contract for personal service, for supplies for current consumption or to be carried
in stock not exceeding the estimated consumption for three (3) months, or banking
transactions of government-owned or controlled banks, no contract involving the
expenditure of public funds by any government agency shall be entered into or
authorized unless the proper accounting official of the agency concerned shall have
certified to the officer entering into the obligation that funds have been duly
appropriated for the purpose and that the amount necessary to cover the proposed
contract for the current calendar year is available for expenditure on account thereof,
subject to verification by the auditor concerned. The certificate signed by the proper
accounting official and the auditor who verified it, shall be attached to and become an
integral part of the proposed contract, and the sum so certified shall not thereafter be
available for expenditure for any other purpose until the obligation of the government
agency concerned under the contract is fully extinguished."

Referring to the aforequoted provisions, this Court has held that "(I)t is quite evident from the
tenor of the language of the law that the existence of appropriations and the availability of
funds are indispensable pre-requisites to or conditions sine qua non for the execution of
government contracts. The obvious intent is to impose such conditions as a priori requisites
to the validity of the proposed contract."93

Notwithstanding the constitutional ban, statutory mandates and Jurisprudential precedents,


the three Supplements to the ARCA, which were not approved by NEDA, imposed on
government the additional burden of spending public moneys without prior appropriation.

In the First Supplement ("FS") dated August 27, 1999, the following requirements were
imposed on the government:

• To construct, maintain and keep in good repair and operating condition all airport
support services, facilities, equipment and infrastructure owned and/or operated by
MIAA, which are not part of the Project or which are located outside the Site, even
though constructed by Concessionaire - including the access road connecting
Terminals II and III and the taxilane, taxiways and runways
• To obligate the MIAA to provide funding for the upkeep, maintenance and repair of
the airports and facilities owned or operated by it and by third persons under its
control in order to ensure compliance with international standards; and holding MIAA
liable to Piatco for the latter's losses, expenses and damages as well as for the
latter's liability to third persons, in case MIAA fails to perform such obligations; in
addition, MIAA will also be liable for the incremental and consequential costs of the
remedial work done by Piatco on account of the former's default.

• Section 4 of the FS imposed on government ten (10) "Additional Special


Obligations," including the following:

o Providing thru MIAA the land required by Piatco for the taxilane and one
taxiway, at no cost to Piatco
o Implementing the government's existing storm drainage master plan
o Coordinating with DPWH the financing, implementation and completion of the
following works before the In-Service Date: three left-turning overpasses
(Edsa to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales
Ave.) and a road upgrade and improvement program involving widening,
repair and resurfacing of Sales Road, Andrews Avenue and Manlunas Road;
improvement of Nichols Interchange; and removal of squatters along
Andrews Avenue
o Dealing directly with BCDA and the Philippine Air Force in acquiring
additional land or right of way for the road upgrade and improvement
program
o Requiring government to work for the immediate reversion to MIAA of the
Nayong Pilipino National Park, in order to permit the building of the second
west parallel taxiway

• Section 5 of the FS also provides that in lieu of the access tunnel, a surface access
road (T2-T3) will be constructed. This provision requires government to expend funds
to purchase additional land from Nayong Pilipino and to clear the same in order to be
able to deliver clean possession of the site to Piatco, as required in Section 5(c) of
the FS.

On the other hand, the Third Supplement ("TS") obligates the government to deliver, within
120 days from date thereof, clean possession of the land on which the T2-T3 Road is to be
constructed.

The foregoing contractual stipulations undeniably impose on government the expenditures of


public funds not included in any congressional appropriation or authorized by any other
statute. Piatco however attempts to take these stipulations out of the ambit of Sections 46
and 47 of the Administrative Code by characterizing them as stipulations for compliance on a
"best-efforts basis" only.

To determine whether the additional obligations under the Supplements may really be
undertaken on a best-efforts basis only, the nature of each of these obligations must be
examined in the context of its relevance and significance to the Terminal III Project, as well
as of any adverse impact that may result if such obligation is not performed or undertaken on
time. In short, the criteria for determining whether the best-efforts basis will apply is whether
the obligations are critical to the success of the Project and, accordingly, whether failure to
perform them (or to perform them on time) could result in a material breach of the contract.
Viewed in this light, the "Additional Special Obligations" set out in Section 4 of the FS take on
a different aspect. In particular, each of the following may all be deemed to play a major role
in the successful and timely prosecution of the Terminal III Project: the obtention of land
required by PIATCO for the taxilane and taxiway; the implementation of government's
existing storm drainage master plan; and coordination with DPWH for the completion of the
three left-turning overpasses before the In-Service Date, as well as acquisition and delivery
of additional land for the construction of the T2-T3 access road.

Conversely, failure to deliver on any of these obligations may conceivably result in


substantial prejudice to the concessionaire, to such an extent as to constitute a material
breach of the Piatco Contracts. Whereupon, the concessionaire may outrightly terminate the
Contracts pursuant to Section 8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated
Damages in accordance with Section 8.02(a) of the ARCA; or the concessionaire may
instead require government to pay the Incremental and Consequential Losses under Section
1.23 of the ARCA.94The logical conclusion then is that the obligations in the Supplements are
not to be performed on a best-efforts basis only, but are unarguably mandatory in character.

Regarding MIAA's obligation to coordinate with the DPWH for the complete implementation
of the road upgrading and improvement program for Sales, Andrews and Manlunas Roads
(which provide access to the Terminal III site) prior to the In-Service Date, it is essential to
take note of the fact that there was a pressing need to complete the program before the
opening of Terminal III.95 For that reason, the MIAA was compelled to enter into a
memorandum of agreement with the DPWH in order to ensure the timely completion of the
road widening and improvement program. MIAA agreed to advance the total amount of
P410.11 million to DPWH for the works, while the latter was committed to do the following:

"2.2.8. Reimburse all advance payments to MIAA including but not limited to interest,
fees, plus other costs of money within the periods CY2004 and CY2006 with
payment of no less than One Hundred Million Pesos (PhP100M) every year.

"2.2.9. Perform all acts necessary to include in its CY2004 to CY2006 budget
allocation the repayments for the advances made by MIAA, to ensure that the
advances are fully repaid by CY2006. For this purpose, DPWH shall include the
amounts to be appropriated for reimbursement to MIAA in the "Not Needing
Clearance" column of their Agency Budget Matrix (ABM) submitted to the
Department of Budget and Management."

It can be easily inferred, then, that DPWH did not set aside enough funds to be able to
complete the upgrading program for the crucially situated access roads prior to the targeted
opening date of Terminal III; and that, had MIAA not agreed to lend the P410 Million, DPWH
would not have been able to complete the program on time. As a consequence, government
would have been in breach of a material obligation. Hence, this particular undertaking of
government may likewise not be construed as being for best-efforts compliance only.

They also Infringe on the Legislative Prerogative and Power Over the Public Purse

But the particularly sad thing about this transaction between MIAA and DPWH is the fact that
both agencies were maneuvered into (or allowed themselves to be maneuvered into) an
agreement that would ensure delivery of upgraded roads for Piatco's benefit, using funds not
allocated for that purpose. The agreement would then be presented to Congress as a done
deal. Congress would thus be obliged to uphold the agreement and support it with the
necessary allocations and appropriations for three years, in order to enable DPWH to deliver
on its committed repayments to MIAA. The net result is an infringement on the legislative
power over the public purse and a diminution of Congress' control over expenditures of
public funds - a development that would not have come about, were it not for the
Supplements. Very clever but very illegal!

EPILOGUE
What Do We Do Now?

In the final analysis, there remains but one ultimate question, which I raised during the Oral
Argument on December 10, 2002: What do we do with the Piatco Contracts and
Terminal III?96 (Feeding directly into the resolution of the decisive question is the other
nagging issue: Why should we bother with determining the legality and validity of these
contracts, when the Terminal itself has already been built and is practically complete?)

Prescinding from all the foregoing disquisition, I find that all the Piatco contracts, without
exception, are void ab initio, and therefore inoperative. Even the very process by which the
contracts came into being - the bidding and the award - has been riddled with irregularities
galore and blatant violations of law and public policy, far too many to ignore. There is thus no
conceivable way, as proposed by some, of saving one (the original Concession Agreement)
while junking all the rest.

Neither is it possible to argue for the retention of the Draft Concession Agreement (referred
to in the various pleadings as the Contract Bidded Out) as the contract that should be kept in
force and effect to govern the situation, inasmuch as it was never executed by the parties.
What Piatco and the government executed was the Concession Agreement which is entirely
different from the Draft Concession Agreement.

Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable


mutilation of public policy and an insult to ourselves if we opt to keep in place a contract -
any contract - for to do so would assume that we agree to having Piatco continue as the
concessionaire for Terminal III.

Despite all the insidious contraventions of the Constitution, law and public policy Piatco
perpetrated, keeping Piatco on as concessionaire and even rewarding it by allowing it to
operate and profit from Terminal III - instead of imposing upon it the stiffest sanctions
permissible under the laws - is unconscionable.

It is no exaggeration to say that Piatco may not really mind which contract we decide to keep
in place. For all it may care, we can do just as well without one, if we only let it continue and
operate the facility. After all, the real money will come not from building the Terminal, but
from actually operating it for fifty or more years and charging whatever it feels like, without
any competition at all. This scenario must not be allowed to happen.

If the Piatco contracts are junked altogether as I think they should be, should not AEDC
automatically be considered the winning bidder and therefore allowed to operate the facility?
My answer is a stone-cold 'No'. AEDC never won the bidding, never signed any contract, and
never built any facility. Why should it be allowed to automatically step in and benefit from the
greed of another?

Should government pay at all for reasonable expenses incurred in the construction of the
Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of
Piatco and, in particular, its funders, contractors and investors - both local and foreign. After
all, there is no question that the State needs and will make use of Terminal III, it being part
and parcel of the critical infrastructure and transportation-related programs of government.

In Melchor v. Commission on Audit,97 this Court held that even if the contract therein was
void, the principle of payment by quantum meruit was found applicable, and the contractor
was allowed to recover the reasonable value of the thing or services rendered (regardless of
any agreement as to the supposed value), in order to avoid unjust enrichment on the part of
government. The principle of quantum meruit was likewise applied in Eslao v. Commission
on Audit,98 because to deny payment for a building almost completed and already occupied
would be to permit government to unjustly enrich itself at the expense of the contractor. The
same principle was applied in Republic v. Court of Appeals.99

One possible practical solution would be for government - in view of the nullity of the Piatco
contracts and of the fact that Terminal III has already been built and is almost finished - to
bid out the operation of the facility under the same or analogous principles as build-operate-
and-transfer projects. To be imposed, however, is the condition that the winning bidder must
pay the builder of the facility a price fixed by government based on quantum meruit; on the
real, reasonable - not inflated - value of the built facility.

How the payment or series of payments to the builder, funders, investors and contractors will
be staggered and scheduled, will have to be built into the bids, along with the annual
guaranteed payments to government. In this manner, this whole sordid mess could result in
something truly beneficial for all, especially for the Filipino people.

WHEREFORE, I vote to grant the Petitions and to declare the subject


contracts NULL and VOID.
G.R. No. 154599 January 21, 2004

THE LIGA NG MGA BARANGAY NATIONAL, petitioner,


vs.
THE CITY MAYOR OF MANILA, HON. JOSE ATIENZA, JR., and THE CITY COUNCIL OF
MANILA, respondents.

DECISION

DAVIDE, JR., C.J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks the nullification of Manila
City Ordinance No. 8039, Series of 2002,1 and respondent City Mayor’s Executive Order No.
011, Series of 2002,2 dated 15 August 2002 , for being patently contrary to law.

The antecedents are as follows:

Petitioner Liga ng mga Barangay National (Liga for brevity) is the national
organization of all the barangays in the Philippines, which pursuant to Section 492 of
Republic Act No. 7160, otherwise known as The Local Government Code of 1991,
constitutes the duly elected presidents of highly-urbanized cities, provincial chapters,
the metropolitan Manila Chapter, and metropolitan political subdivision chapters.

Section 493 of that law provides that "[t]he liga at the municipal, city, provincial,
metropolitan political subdivision, and national levels directly elect a president, a
vice-president, and five (5) members of the board of directors." All other matters not
provided for in the law affecting the internal organization of the leagues of local
government units shall be governed by their respective constitution and by-laws,
which must always conform to the provisions of the Constitution and existing laws.3

On 16 March 2000, the Liga adopted and ratified its own Constitution and By-laws to govern
its internal organization.4 Section 1, third paragraph, Article XI of said Constitution and By-
Laws states:

All other election matters not covered in this Article shall be governed by the "Liga
Election Code" or such other rules as may be promulgated by the National Liga
Executive Board in conformity with the provisions of existing laws.

By virtue of the above-cited provision, the Liga adopted and ratified its own Election
Code.5 Section 1.2, Article I of the Liga Election Code states:

1.2 Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters. There shall
be nationwide synchronized elections for the provincial, metropolitan, and HUC/ICC
chapters to be held on the third Monday of the month immediately after the month
when the synchronized elections in paragraph 1.1 above was held. The incumbent
Liga chapter president concerned duly assisted by the proper government agency,
office or department, e.g. Provincial/City/NCR/Regional Director, shall convene all
the duly elected Component City/Municipal Chapter Presidents and all the current
elected Punong Barangays (for HUC/ICC) of the respective chapters in any public
place within its area of jurisdiction for the purpose of reorganizing and electing the
officers and directors of the provincial, metropolitan or HUC/ICC Liga chapters. Said
president duly assisted by the government officer aforementioned, shall notify, in
writing, all the above concerned at least fifteen (15) days before the scheduled
election meeting on the exact date, time, place and requirements of the said meeting.

The Liga thereafter came out with its Calendar of Activities and Guidelines in the
Implementation of the Liga Election Code of 2002,6 setting on 21 October 2002 the
synchronized elections for highly urbanized city chapters, such as the Liga Chapter of
Manila, together with independent component city, provincial, and metropolitan chapters. lawphi1.net

On 28 June 2002, respondent City Council of Manila enacted Ordinance No. 8039, Series of
2002, providing, among other things, for the election of representatives of the District
Chapters in the City Chapter of Manila and setting the elections for both chapters thirty days
after the barangay elections. Section 3 (A) and (B) of the assailed ordinance read:

SEC. 3. Representation Chapters. — Every Barangay shall be represented in the


said Liga Chapters … by the Punong Barangay…or, in his absence or incapacity, by
the kagawad duly elected for the purpose among its members….

A. District Chapter

All elected Barangay Chairman in each District shall elect from among themselves
the President, Vice-President and five (5) members of the Board….

B. City Chapter

The District Chapter representatives shall automatically become members of the


Board and they shall elect from among themselves a President, Vice-President,
Secretary, Treasurer, Auditor and create other positions as it may deem necessary
for the management of the chapter.

The assailed ordinance was later transmitted to respondent City Mayor Jose L.
Atienza, Jr., for his signature and approval.

On 16 July 2002, upon being informed that the ordinance had been forwarded to the
Office of the City Mayor, still unnumbered and yet to be officially released, the Liga
sent respondent Mayor of Manila a letter requesting him that said ordinance be
vetoed considering that it encroached upon, or even assumed, the functions of the
Liga through legislation, a function which was clearly beyond the ambit of the powers
of the City Council.7

Respondent Mayor, however, signed and approved the assailed city ordinance and issued
on 15 August 2002 Executive Order No. 011, Series of 2002, to implement the ordinance.

Hence, on 27 August 2002, the Liga filed the instant petition raising the following issues:

WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA COMMITTED


GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION, WHEN IT ENACTED CITY ORDINANCE NO. 8039 S. 2002 PURPOSELY
TO GOVERN THE ELECTIONS OF THE MANILA CHAPTER OF THE LIGA NG MGA
BARANGAYS AND WHICH PROVIDES A DIFFERENT MANNER OF ELECTING ITS
OFFICERS, DESPITE THE FACT THAT SAID CHAPTER’S ELECTIONS, AND THE
ELECTIONS OF ALL OTHER CHAPTERS OF THE LIGA NG MGA BARANGAYS FOR
THAT MATTER, ARE BY LAW MANDATED TO BE GOVERNED BY THE LIGA
CONSTITUTION AND BY-LAWS AND THE LIGA ELECTION CODE.

II

WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA COMMITTED GRAVE


ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION
WHEN HE ISSUED EXECUTIVE ORDER NO. 011 TO IMPLEMENT THE QUESTIONED
CITY ORDINANCE NO. 8039 S. 2002.

In support of its petition, the Liga argues that City Ordinance No. 8039, Series of 2002, and
Executive Order No. 011, Series of 2002, contradict the Liga Election Code and are therefore
invalid. There exists neither rhyme nor reason, not to mention the absence of legal basis, for
the Manila City Council to encroach upon, or even assume, the functions of the Liga by
prescribing, through legislation, the manner of conducting the Liga elections other than what
has been provided for by the Liga Constitution and By-laws and the Liga Election Code.
Accordingly, the subject ordinance is an ultra vires act of the respondents and, as such,
should be declared null and void.

As for its prayer for the issuance of a temporary restraining order, the petitioner cites as
reason therefor the fact that under Section 5 of the assailed city ordinance, the Manila
District Chapter elections would be held thirty days after the regular barangay elections.
Hence, it argued that the issuance of a temporary restraining order and/or preliminary
injunction would be imperative to prevent the implementation of the ordinance and executive
order.

On 12 September 2002, Barangay Chairman Arnel Peña, in his capacity as a member of the
Liga ng mga Barangay in the City Chapter of Manila, filed a Complaint in Intervention with
Urgent Motion for the Issuance of Temporary Restraining Order and/or Preliminary
Injunction.8 He supports the position of the Liga and prays for the declaration of the
questioned ordinance and executive order, as well as the elections of the Liga ng mga
Barangay pursuant thereto, to be null and void. The assailed ordinance prescribing for an
"indirect manner of election" amended, in effect, the provisions of the Local Government
Code of 1991, which provides for the election of the Liga officers at large. It also violated and
curtailed the rights of the petitioner and intervenor, as well as the other 896 Barangay
Chairmen in the City of Manila, to vote and be voted upon in a direct election.

On 25 October 2002, the Office of the Solicitor General (OSG) filed a Manifestation in lieu of
Comment.9 It supports the petition of the Liga, arguing that the assailed city ordinance and
executive order are clearly inconsistent with the express public policy enunciated in R.A. No.
7160. Local political subdivisions are able to legislate only by virtue of a valid delegation of
legislative power from the national legislature. They are mere agents vested with what is
called the power of subordinate legislation. Thus, the enactments in question, which are local
in origin, cannot prevail against the decree, which has the force and effect of law.

On the issue of non-observance by the petitioners of the hierarchy-of-courts rule, the OSG
posits that technical rules of procedure should be relaxed in the instant petition. While Batas
Pambansa Blg. 129, as amended, grants original jurisdiction over cases of this nature to the
Regional Trial Court (RTC), the exigency of the present petition, however, calls for the
relaxation of this rule. Section 496 (should be Section 491) of the Local Government Code of
1991 primarily intended that the Liga ng mga Barangay determine the representation of the
Liga in the sanggunians for the immediate ventilation, articulation, and crystallization of
issues affecting barangay government administration. Thus, the immediate resolution of this
petition is a must.

On the other hand, the respondents defend the validity of the assailed ordinance and
executive order and pray for the dismissal of the present petition on the following grounds:
(1) certiorari under Rule 65 of the Rules of Court is unavailing; (2) the petition should not be
entertained by this Court in view of the pendency before the Regional Trial Court of Manila of
two actions or petitions questioning the subject ordinance and executive order; (3) the
petitioner is guilty of forum shopping; and (4) the act sought to be enjoined is fait accompli.

The respondents maintain that certiorari is an extraordinary remedy available to one


aggrieved by the decision of a tribunal, officer, or board exercising judicial or quasi-judicial
functions. The City Council and City Mayor of Manila are not the "board" and "officer"
contemplated in Rule 65 of the Rules of Court because both do not exercise judicial
functions. The enactment of the subject ordinance and issuance of the questioned executive
order are legislative and executive functions, respectively, and thus, do not fall within the
ambit of "judicial functions." They are both within the prerogatives, powers, and authority of
the City Council and City Mayor of Manila, respectively. Furthermore, the petition failed to
show with certainty that the respondents acted without or in excess of jurisdiction or with
grave abuse of discretion.

The respondents also asseverate that the petitioner cannot claim that it has no other
recourse in addressing its grievance other than this petition for certiorari. As a matter of fact,
there are two cases pending before Branches 33 and 51 of the RTC of Manila (one is for
mandamus; the other, for declaratory relief) and three in the Court of Appeals (one is for
prohibition; the two other cases, for quo warranto), which are all akin to the present petition
in the sense that the relief being sought therein is the declaration of the invalidity of the
subject ordinance. Clearly, the petitioner may ask the RTC or the Court of Appeals the relief
being prayed for before this Court. Moreover, the petitioner failed to prove discernible
compelling reasons attending the present petition that would warrant cognizance of the
present petition by this Court.

Besides, according to the respondents, the petitioner has transgressed the proscription
against forum-shopping in filing the instant suit. Although the parties in the other pending
cases and in this petition are different individuals or entities, they represent the same
interest.

With regard to petitioner's prayer for temporary restraining order and/ or preliminary
injunction in its petition, the respondents maintain that the same had become moot and
academic in view of the elections of officers of the City Liga ng mga Barangay on 15
September 2002 and their subsequent assumption to their respective offices.10 Since the
acts to be enjoined are now fait accompli, this petition for certiorari with an application for
provisional remedies must necessarily fail. Thus, where the records show that during the
pendency of the case certain events or circumstances had taken place that render the case
moot and academic, the petition for certiorari must be dismissed.

After due deliberation on the pleadings filed, we resolve to dismiss this petition for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial capacity nor arrogated
unto themselves any judicial or quasi-judicial prerogatives. A petition for certiorari under Rule
65 of the 1997 Rules of Civil Procedure is a special civil action that may be invoked only
against a tribunal, board, or officer exercising judicial or quasi-judicial functions.

Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:

SECTION 1. Petition for certiorari. — When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.

Elsewise stated, for a writ of certiorari to issue, the following requisites must concur:
(1) it must be directed against a tribunal, board, or officer exercising judicial or quasi-
judicial functions; (2) the tribunal, board, or officer must have acted without or in
excess of jurisdiction or with grave abuse of discretion amounting lack or excess of
jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in
the ordinary course of law.

A respondent is said to be exercising judicial function where he has the power to


determine what the law is and what the legal rights of the parties are, and then
undertakes to determine these questions and adjudicate upon the rights of the
parties.11

Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion,
etc., of public administrative officers or bodies … required to investigate facts or ascertain
the existence of facts, hold hearings, and draw conclusions from them as a basis for their
official action and to exercise discretion of a judicial nature."12

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary
that there be a law that gives rise to some specific rights of persons or property under which
adverse claims to such rights are made, and the controversy ensuing therefrom is brought
before a tribunal, board, or officer clothed with power and authority to determine the law and
adjudicate the respective rights of the contending parties.13

The respondents do not fall within the ambit of tribunal, board, or officer exercising judicial or
quasi-judicial functions. As correctly pointed out by the respondents, the enactment by the
City Council of Manila of the assailed ordinance and the issuance by respondent Mayor of
the questioned executive order were done in the exercise of legislative and executive
functions, respectively, and not of judicial or quasi-judicial functions. On this score alone,
certiorari will not lie.

Second, although the instant petition is styled as a petition for certiorari, in essence, it seeks
the declaration by this Court of the unconstitutionality or illegality of the questioned ordinance
and executive order. It, thus, partakes of the nature of a petition for declaratory relief over
which this Court has only appellate, not original, jurisdiction.14 Section 5, Article VIII of the
Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:

(1) Exercise original jurisdiction over cases affecting ambassadors, other


public ministers and consuls, and over petitions for certiorari, prohibition,
mandamus, quo warranto, and habeas corpus.

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as the


law or the Rules of Court may provide, final judgments and orders of lower
courts in:

(a) All cases in which the constitutionality or validity of any treaty,


international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in
question. (Italics supplied).

As such, this petition must necessary fail, as this Court does not have original
jurisdiction over a petition for declaratory relief even if only questions of law are
involved.15

Third, even granting arguendo that the present petition is ripe for the extraordinary writ
of certiorari, there is here a clear disregard of the hierarchy of courts. No special and
important reason or exceptional and compelling circumstance has been adduced by the
petitioner or the intervenor why direct recourse to this Court should be allowed.

We have held that this Court’s original jurisdiction to issue a writ of certiorari (as well as of
prohibition, mandamus, quo warranto, habeas corpus and injunction) is not exclusive, but is
concurrent with the Regional Trial Courts and the Court of Appeals in certain cases. As aptly
stated in People v. Cuaresma:16

This concurrence of jurisdiction is not, however, to be taken as according to parties


seeking any of the writs an absolute, unrestrained freedom of choice of the court to
which application therefor0 will be directed. There is after all a hierarchy of courts.
That hierarchy is determinative of the venue of appeals, and also serves as a general
determinant of the appropriate forum for petitions for the extraordinary writs. A
becoming regard of that judicial hierarchy most certainly indicates that petitions for
the issuance of extraordinary writs against first level ("inferior") courts should be filed
with the Regional Trial Court, and those against the latter, with the Court of Appeals.
A direct invocation of the Supreme Court’s original jurisdiction to issue these writs
should be allowed only when there are special and important reasons therefor,
clearly and specifically set out in the petition. This is [an] established policy. It is a
policy necessary to prevent inordinate demands upon the Court’s time and attention
which are better devoted to those matters within its exclusive jurisdiction, and to
prevent further over-crowding of the Court’s docket.

As we have said in Santiago v. Vasquez,17 the propensity of litigants and lawyers to


disregard the hierarchy of courts in our judicial system by seeking relief directly from this
Court must be put to a halt for two reasons: (1) it would be an imposition upon the precious
time of this Court; and (2) it would cause an inevitable and resultant delay, intended or
otherwise, in the adjudication of cases, which in some instances had to be remanded or
referred to the lower court as the proper forum under the rules of procedure, or as better
equipped to resolve the issues because this Court is not a trier of facts.
Thus, we shall reaffirm the judicial policy that this Court will not entertain direct resort to it
unless the redress desired cannot be obtained in the appropriate courts, and exceptional and
compelling circumstances justify the availment of the extraordinary remedy of writ of
certiorari, calling for the exercise of its primary jurisdiction.18

Petitioner’s reliance on Pimentel v. Aguirre19 is misplaced because the non-observance of


the hierarchy-of-courts rule was not an issue therein. Besides, what was sought to be
nullified in the petition for certiorari and prohibition therein was an act of the President of the
Philippines, which would have greatly affected all local government units. We reiterated
therein that when an act of the legislative department is seriously alleged to have infringed
the Constitution, settling the controversy becomes the duty of this Court. The same is true
when what is seriously alleged to be unconstitutional is an act of the President, who in our
constitutional scheme is coequal with Congress.

We hesitate to rule that the petitioner and the intervenor are guilty of forum-shopping. Forum-
shopping exists where the elements of litis pendentia are present or when a final judgment in
one case will amount to res judicata in the other. For litis pendentia to exist, the following
requisites must be present: (1) identity of parties, or at least such parties as are representing
the same interests in both actions; (2) identity of rights asserted and reliefs prayed for, the
reliefs being founded on the same facts; and (3) identity with respect to the two preceding
particulars in the two cases, such that any judgment that may be rendered in the pending
case, regardless of which party is successful, would amount to res judicata in the other
case.20

In the instant petition, and as admitted by the respondents, the parties in this case and in the
alleged other pending cases are different individuals or entities; thus, forum-shopping cannot
be said to exist. Moreover, even assuming that those five petitions are indeed pending
before the RTC of Manila and the Court of Appeals, we can only guess the causes of action
and issues raised before those courts, considering that the respondents failed to furnish this
Court with copies of the said petitions.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.
G.R. No. 139791 December 12, 2003

MANILA BANKERS LIFE INSURANCE CORPORATION, petitioner,


vs.
EDDY NG KOK WEI, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari assailing the Decision 1 dated March 26, 1999
and Resolution2 dated August 5, 1999 of the Court of Appeals in CA-G.R. CV No. 40504,
entitled "Eddy Ng Kok Wei vs. Manila Bankers Life Insurance Corporation".

The factual antecedents as borne by the records are:

Eddy Ng Kok Wei, respondent, is a Singaporean businessman who ventured into investing in
the Philippines. On November 29, 1988, respondent, in a Letter of Intent addressed to
Manila Bankers Life Insurance Corporation, petitioner, expressed his intention to purchase a
condominium unit at Valle Verde Terraces.

Subsequently or on December 5, 1988, respondent paid petitioner a reservation fee of


₱50,000.00 for the purchase of a 46-square meter condominium unit (Unit 703) valued at
₱860,922.00. On January 16, 1989, respondent paid 90% of the purchase price in the sum
of ₱729,830.00.

Consequently, petitioner, through its President, Mr. Antonio G. Puyat, executed a Contract to
Sell in favor of the respondent. The contract expressly states that the subject condominium
unit "shall substantially be completed and delivered" to the respondent "within fifteen (15)
months" from February 8, 1989 or on May 8, 1990, and that "(S)hould there be no
substantial completion and fail(ure) to deliver the unit on the date specified, a penalty of 1%
of the total amount paid (by respondent) shall be charged against (petitioner)".

Considering that the stipulated 15-month period was at hand, respondent returned to the
Philippines sometime in April, 1990.

In a letter dated April 5, 1990, petitioner, through its Senior Assistant Vice-President, Mr.
Mario G. Zavalla, informed respondent of the substantial completion of his condominium unit,
however, due to various uncontrollable forces (such as coup d‘ etat attempts, typhoon and
steel and cement shortage), the final turnover is reset to May 31, 1990.1âw phi1

Meanwhile, on July 5, 1990, upon receipt of petitioner’s notice of delivery dated May 31,
1990, respondent again flew back to Manila. He found the unit still uninhabitable for lack of
water and electric facilities.

Once more, petitioner issued another notice to move-in addressed to its building
administrator advising the latter that respondent is scheduled to move in on August 22, 1990.

On October 5, 1990, respondent returned to the Philippines only to find that his condominium
unit was still unlivable. Exasperated, he was constrained to send petitioner a letter dated
November 21, 1990 demanding payment for the damages he sustained. But petitioner
ignored such demand, prompting respondent to file with the Regional Trial Court, Branch
150, Makati City, a complaint against the former for specific performance and damages,
docketed as Civil Case No. 90-3440.

Meanwhile, during the pendency of the case, respondent finally accepted the condominium
unit and on April 12, 1991, occupied the same. Thus, respondent’s cause of action has been
limited to his claim for damages.

On December 18, 1992, the trial court rendered a Decision3 finding the petitioner liable for
payment of damages due to the delay in the performance of its obligation to the respondent.
The dispositive portion reads:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant,


ordering Manila Bankers Life Insurance Corporation to pay plaintiff Eddy Ng Kok Wei the
following:

1. One percent (1%) of the total amount plaintiff paid defendant;

2. ₱100,000.00 as moral damages;

3. ₱50,000.00 as exemplary damages;

4. ₱25,000.00 by way of attorney’s fees; and

Cost of suit.

"SO ORDERED."

On appeal, the Court of Appeals, in a Decision dated March 26, 1999, affirmed in toto the
trial court’s award of damages in favor of the respondent.

Unsatisfied, petitioner filed a motion for reconsideration but was denied by the Appellate
Court in a Resolution dated August 5, 1999.

Hence, this petition for review on certiorari. Petitioner contends that the trial court has no
jurisdiction over the instant case; and that the Court of Appeals erred in affirming the trial
court’s finding that petitioner incurred unreasonable delay in the delivery of the condominium
unit to respondent.

On petitioner’s contention that the trial court has no jurisdiction over the instant case, Section
1 (c) of Presidential Decree No. 1344, as amended, provides:

"SECTION 1. – In the exercise of its functions to regulate the real estate trade and business
and in addition to its powers provided for in Presidential Decree No. 957, the National
Housing Authority [now Housing and Land Use Regulatory Board (HLURB)]4 shall
have exclusive jurisdiction to hear and decide cases of the following nature:

xxx
"C. Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lots or condominium units against the owner, developer, dealer, broker
or salesman.

x x x."

Pursuant to the above provisions, it is the HLURB which has jurisdiction over the instant
case. We have consistently held that complaints for specific performance with damages by a
lot or condominium unit buyer against the owner or developer falls under the exclusive
jurisdiction of the HLURB.5

While it may be true that the trial court is without jurisdiction over the case, petitioner’s active
participation in the proceedings estopped it from assailing such lack of it. We have held that
it is an undesirable practice of a party participating in the proceedings and submitting its case
for decision and then accepting the judgment, only if favorable, and attacking it for lack of
jurisdiction, when adverse.6

Here, petitioner failed to raise the question of jurisdiction before the trial court and the
Appellate Court. In effect, petitioner confirmed and ratified the trial court’s jurisdiction over
this case. Certainly, it is now in estoppel and can no longer question the trial court’s
jurisdiction.

On petitioner’s claim that it did not incur delay, suffice it to say that this is a factual issue.
Time and again, we have ruled that "the factual findings of the trial court are given weight
when supported by substantial evidence and carries more weight when affirmed by the Court
of Appeals."7 Whether or not petitioner incurred delay and thus, liable to pay damages
as a result thereof, are indeed factual questions.

The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, is limited to reviewing only errors of law, not of fact,
unless the factual findings being assailed are not supported by evidence on record or the
impugned judgment is based on a misapprehension of facts.8 These exceptions are not
present here.

WHEREFORE, the petition is DENIED. The assailed Decision dated March 26, 1999 and
Resolution dated August 5, 1999 of the Court of Appeals are hereby AFFIRMED IN TOTO.

Costs against the petitioner.

SO ORDERED.

Vitug, (Chairman), Corona, and Carpio-Morales, JJ., concur.


A.M. No. MTJ-01-1370 April 25, 2003
(Formerly A.M. No. 00-11-238-MTC)

OFFICE OF THE COURT ADMINISTRATOR, complainant,


vs.
JUDGE AGUSTIN T. SARDIDO, Municipal Trial Court of Koronadal, South
Cotabato, respondent.

CARPIO, J.:

The Case

This is an administrative case against respondent Judge Agustin T. Sardido ("Judge


Sardido") formerly presiding judge of the Municipal Trial Court of Koronadal, South Cotabato,
for gross ignorance of the law. Judge Sardido issued an Order dated 20 October 1998
excluding Judge Braulio Hurtado, Jr. ("Judge Hurtado") of the Regional Trial Court of
Kabacan, North Cotabato as one of the accused in an Amended Information.1 Judge Sardido
ruled that Supreme Court Circular No. 3-89 requires that Judge Hurtado be dropped from the
Amended Information and his case be forwarded to the Court.

The Facts

Private complainant Teresita Aguirre Magbanua accused Oscar Pagunsan and Danilo Ong
of the crime of "Falsification by Private Individual and Use of Falsified Document." 2 The
Amended Information included Judge Hurtado. The case, docketed as Criminal Case No.
14071, was raffled to Judge Sardido, then presiding judge of the Municipal Trial Court of
Koronadal, South Cotabato ("MTC-Koronadal").

In a Deed of Absolute Sale dated 8 August 1993, private complainant Magbanua and six
other vendors allegedly sold two parcels of land, covered by TCT Nos. 47873 and 33633 and
located at the commercial district of Koronadal, to Davao Realty Development Corporation,
represented by accused Ong, with co-accused Pagunsan, as broker. Judge Hurtado, who at
that time was the Clerk of Court of RTC-Koronadal and ex-officio notary public, notarized the
Deed of Absolute Sale.

However, private complainant Magbanua denies signing the Deed of Absolute Sale dated 8
August 1993 which states that the consideration for the sale was only P600,000.00. Private
complainant asserts that what she and the other vendors signed was a Deed of Absolute
Sale dated 6 August 1996 for a consideration of P16,000,000.00. Under the terms of the
sale, the vendee agreed to pay for the capital gains tax. The consideration in the 8 August
1993 Deed of Absolute Sale was apparently undervalued. Subsequently, the Bureau of
Internal Revenue assessed the vendors a deficiency capital gains tax of P1,023,375.00.

Judge Hurtado filed a motion praying that the criminal complaint against him be forwarded to
the Supreme Court. Judge Hurtado claimed that Circular No. 3-89 dated 6 February 1989
requires "all cases involving justices and judges of the lower courts, whether or not such
complaints deal with acts apparently unrelated to the discharge of their official functions,
such as acts of immorality, estafa, crimes against persons and property, etc." to be
forwarded to the Supreme Court. Judge Hurtado asserted that since the case against him is
one involving a judge of a lower court, the same should be forwarded to the Supreme Court
pursuant to Circular No. 3-89.
The Provincial Prosecutor opposed Judge Hurtado’s motion, arguing that the case against
Judge Hurtado is not within the scope of Circular No. 3-89 since it is not an IBP-initiated
case. Moreover, the offense charged was committed in 1993 when Judge Hurtado was still a
clerk of court and ex-officio notary public.

On 20 October 1998, Judge Sardido issued an Order, the pertinent portions of which read:

The issue to be resolved in the instant case is, whether the case of Judge Hurtado,
who is charged for acts committed prior to his appointment as an RTC Judge, falls
within the purview of the afore-said Circular No. 3-89.

It is the humble submission of the Court that the case of Judge Hurtado, an RTC
Judge of the Regional Trial Court of Kabacan, North Cotabato, falls within the
meaning and intent of the said circular.

For reasons being, firstly, the said circular provides that all cases involving justices
and judges of lower courts shall be forwarded to the Supreme Court for appropriate
action, whether or not such complaints deal with acts apparently unrelated to the
discharge of their official functions, and regardless of the nature of the crime, without
any qualification whether the crime was committed before or during his tenure of
office. Under the law on Legal Hermeneutics, if the law does not qualify we must not
qualify. Secondly, it would sound, to the mind of the Court, awkward for a first level
court to be trying an incumbent judge of a second level court.

For reasons afore-stated, this Court can not and shall not try this case as against
Judge Hurtado, unless the Honorable Supreme Court would order otherwise.

Wherefore, the foregoing premises duly considered, the name of Judge Braulio L.
Hurtado, Jr. is ordered excluded from the amended information and the case against
him is ordered forwarded to the Honorable Supreme Court, pursuant to the afore-
said Circular No. 3-89 of the Supreme Court, dated February 9, 1989.

Accordingly, Maxima S. Borja ("Borja"), Stenographer I and Acting Clerk of Court II of the
MTC-Koronadal, South Cotabato, wrote a letter dated 21 July 1999 forwarding the criminal
case against Judge Hurtado to the Court Administrator for appropriate action.

Then Court Administrator Alfredo L. Benipayo issued a Memorandum dated 25 October 2000
pointing out that Circular No. 3-89 refers only to administrative complaints filed with the IBP
against justices and judges of lower courts. The Circular does not apply to criminal cases
filed before trial courts against such justices and judges.

Thus, in the Resolution of 6 December 2000, the Court directed that the letter of Acting Clerk
of Court Borja be returned to the MTC-Koronadal together with the records of the criminal
case. The Court directed Judge Sardido to explain in writing why he should not be held liable
for gross ignorance of the law for excluding Judge Hurtado from the Amended Information
and for transmitting the records of Judge Hurtado’s case to the Court.

In his Explanation dated 26 January 2001, Judge Sardido reasoned out that he excluded
Judge Hurtado because Circular No. 3-89 directs the IBP to "forward to the Supreme Court
for appropriate action all cases involving justices and judges of lower courts x x x." Judge
Sardido claims that the Circular likewise "applies to courts in cases involving justices or
judges of the lower courts," especially so in this case where "Judge Hurtado was charged
with falsification of public document as a notary public while he was still the Clerk of Court of
the Regional Trial Court of the 11th Judicial Region in Koronadal, South Cotabato."

In the Resolution of 28 March 2001, the Court referred this case to the Office of the Court
Administrator ("OCA") for evaluation, report and recommendation. On 10 July 2001, the OCA
submitted a Memorandum recommending that this case be re-docketed as a regular
administrative matter.

Judge Sardido filed his Manifestation dated 20 September 2001 stating that he is submitting
the case for decision based on the pleadings and records already filed. Judge Sardido
insisted that he did "what he had done in all honesty and good faith."

OCA’s Findings and Conclusions

The OCA found that Judge Sardido erred in excluding Judge Hurtado as one of the accused
in the Amended Information in Criminal Case No. 14071. The OCA held that Circular No. 3-
89, which is Judge Sardido’s basis in issuing the Order of 20 October 1998, refers to
administrative complaints filed with the IBP against justices and judges of lower courts. The
Circular does not apply to criminal cases filed against justices and judges of lower courts.
The OCA recommended that a fine of P5,000.00 be imposed on Judge Sardido for gross
ignorance of the law.

The Court’s Ruling

The Court issued Circular No. 3-89 in response to a letter dated 19 December 1988 by then
IBP President Leon M. Garcia, seeking clarification of the Court’s En Banc Resolution of 29
November 1998 in RE: Letter of then Acting Presiding Justice Rodolfo A. Nocon 3 and
Associate Justices Reynato Puno4 and Alfredo Marigomen5 of the Court of Appeals.

A certain Atty. Eduardo R. Balaoing had filed a complaint against Court of Appeals Justices
Nocon, Puno and Marigomen relating to a petition filed before their division. In its En Banc
Resolution of 29 November 1988, the Court required the IBP to refer to the Supreme Court
for appropriate action the complaint6 filed by Atty. Balaoing with the IBP Commission on Bar
Discipline. The Court stated that the power to discipline justices and judges of the lower
courts is within the Court’s exclusive power and authority as provided in Section 11, Article
VII of the 1987 Constitution.7 The Court Administrator publicized the En Banc Resolution of
29 November 1988 by issuing Circular No. 17 dated 20 December 1988.

The Court issued Circular No. 3-89 on 6 February 1989 clarifying the En Banc Resolution of
29 November 1988. Circular No. 3-89 provides in part as follows:

(1) The IBP (Board of Governors and Commission on Bar Discipline) shall forward to
the Supreme Court for appropriate action all cases involving justices and judges of
lower courts, whether or not such complaints deal with acts apparently unrelated to
the discharge of their official functions, such as acts of immorality, estafa, crimes
against persons and property, etc. x x x. (Emphasis supplied)

Circular No. 3-89 clarified the second paragraph, Section 1 of Rule 139-B of the Rules of
Court which states that:
The IBP Board of Governors may, motu proprio or upon referral by the Supreme
Court or by a Chapter Board of Officers, or at the instance of any person, initiate and
prosecute proper charges against erring attorneys including those in the government
service. (Emphasis supplied).

As clarified, the phrase "attorneys x x x in the government service" in Section 1 of Rule 139-
B does not include justices of appellate courts and judges of lower courts who are not
subject to the disciplining authority of the IBP. All administrative cases against justices of
appellate courts and judges of lower courts fall exclusively within the jurisdiction of the
Supreme Court.

However, Rule 139-B refers to Disbarment and Discipline of Attorneys which is


administrative and not criminal in nature. The cases referred to in Circular No. 3-89 are
administrative cases for disbarment, suspension or discipline of attorneys, including justices
of appellate courts and judges of the lower courts. The Court has vested the IBP with the
power to initiate and prosecute administrative cases against erring lawyers.8 However, under
Circular No. 3-89, the Court has directed the IBP to refer to the Supreme Court for
appropriate action all administrative cases filed with IBP against justices of appellate courts
and judges of the lower courts. As mandated by the Constitution, the Court exercises the
exclusive power to discipline administratively justices of appellate courts and judges of lower
courts.

Circular No. 3-89 does not refer to criminal cases against erring justices of appellate courts
or judges of lower courts. Trial courts retain jurisdiction over the criminal aspect of offenses
committed by justices of appellate courts9and judges of lower courts. This is clear from the
Circular directing the IBP, and not the trial courts, to refer all administrative cases filed
against justices of appellate courts and judges of lower courts to the Supreme Court. The
case filed against Judge Hurtado is not an administrative case filed with the IBP. It is a
criminal case filed with the trial court under its jurisdiction as prescribed by law.

The acts or omissions of a judge may well constitute at the same time both a criminal act and
an administrative offense. Whether the criminal case against Judge Hurtado relates to an act
committed before or after he became a judge is of no moment. Neither is it material that an
MTC judge will be trying an RTC judge in the criminal case. A criminal case against an
attorney or judge is distinct and separate from an administrative case against him. The
dismissal of the criminal case does not warrant the dismissal of an administrative case
arising from the same set of facts. The quantum of evidence that is required in the latter is
only preponderance of evidence, and not proof beyond reasonable doubt which is required in
criminal cases.10 As held in Gatchalian Promotions Talents Pool, Inc. v. Naldoza:11

Administrative cases against lawyers belong to a class of their own. They are distinct
from and they may proceed independently of civil and criminal cases.

The burden of proof for these types of cases differ. In a criminal case, proof beyond
reasonable doubt is necessary; in an administrative case for disbarment or
suspension, ‘clearly preponderant evidence’ is all that is required. Thus, a criminal
prosecution will not constitute a prejudicial question even if the same facts and
circumstances are attendant in the administrative proceedings.

It should be emphasized that a finding of guilt in the criminal case will not necessarily
result in a finding of liability in the administrative case. Conversely, respondent’s
acquittal does not necessarily exculpate him administratively. In the same vein, the
trial court’s finding of civil liability against the respondent will not inexorably lead to a
similar finding in the administrative action before this Court. Neither will a favorable
disposition in the civil action absolve the administrative liability of the lawyer. The
basic premise is that criminal and civil cases are altogether different from
administrative matters, such that the disposition in the first two will not inevitably
govern the third and vice versa. For this reason, it would be well to remember the
Court’s ruling in In re Almacen, which we quote:

"x x x Disciplinary proceedings against lawyers are sui generis. Neither


purely civil nor purely criminal, they do not involve a trial of an action or a
suit, but are rather investigations by the Court into the conduct of one of its
officers. Not being intended to inflict punishment, [they are] in no sense a
criminal prosecution. Accordingly, there is neither a plaintiff nor a prosecutor
therein. [They] may be initiated by the Court motu proprio. Public interest is
[their] primary objective, and the real question for determination is whether or
not the attorney is still a fit person to be allowed the privileges as such.
Hence, in the exercise of its disciplinary powers, the Court merely calls upon
a member of the Bar to account for his actuations as an officer of the Court
with the end in view of preserving the purity of the legal profession and the
proper and honest administration of justice by purging the profession of
members who by their misconduct have prove[n] themselves no longer
worthy to be entrusted with the duties and responsibilities pertaining to the
office of an attorney. x x x"

A judge is called upon to exhibit more than just a cursory acquaintance with statutes and
procedural rules. He must be conversant with basic legal principles and well-settled
doctrines. He should strive for excellence and seek the truth with passion.12 Judge Sardido
failed in this regard. He erred in excluding Judge Hurtado as one of the accused in the
Amended Information and in forwarding the criminal case against Judge Hurtado to the
Court.

One last point. This administrative case against Judge Sardido started before the
amendment13 of Rule 140 classifying gross ignorance of the law a serious offense
punishable by a fine of more than P20,000.00 but not exceeding P40,000.00. The
amendment cannot apply retroactively to Judge Sardido’s case. However, the fine
of P5,000.00 recommended by the OCA is too light a penalty considering that this is not the
first offense of Judge Sardido.

In RE: Hold Departure Order Issued by Judge Agustin T. Sardido,14 the Court reprimanded
Judge Sardido for issuing a hold-departure order contrary to Circular No. 39-97. In Cabilao v.
Judge Sardido,15 the Court fined Judge Sardido P5,000.00 for gross ignorance of the law,
grave abuse of discretion and gross misconduct. The Court gave a stern warning to Judge
Sardido that a commission of the same or similar act would be dealt with more severely.
In Almeron v. Judge Sardido,16 the Court imposed on Judge Sardido a stiffer fine of
P10,000.00 for gross ignorance of the law. He was again sternly warned that the commission
of the same or similar act in the future would be dealt with more severely including, if
warranted, his dismissal from the service.

In a more recent administrative case, Torcende v. Judge Sardido,17 the Court found Judge
Sardido again guilty of gross ignorance of the law and of gross misconduct. This time the
Court dismissed Judge Sardido from the service with forfeiture of his retirement benefits,
except accrued leave credits. The dismissal was with prejudice to reemployment in any
branch of the government or any of its agencies or instrumentalities, including government-
owned and controlled corporations.

The records of the OCA further disclose that Judge Sardido has other similar administrative
complaints18 still pending against him. Such an unflattering service record erodes the
people’s faith and confidence in the judiciary. It is the duty of every member of the bench to
avoid any impression of impropriety to protect the image and integrity of the judiciary.19 The
Court may still impose a fine on Judge Sardido in the instant case despite his dismissal from
the service.

WHEREFORE, respondent Judge Agustin T. Sardido is FINED Ten Thousand Pesos


(P10,000.00) for gross ignorance of the law. The fine may be deducted from his accrued
leave credits.

SO ORDERED.
G.R. No. 151149 September 7, 2004

GEORGE KATON, petitioner,


vs.
MANUEL PALANCA JR., LORENZO AGUSTIN, JESUS GAPILANGO and JUAN
FRESNILLO, respondents.

DECISION

PANGANIBAN, J.:

Where prescription, lack of jurisdiction or failure to state a cause of action clearly appear
from the complaint filed with the trial court, the action may be dismissed motu proprio by the
Court of Appeals, even if the case has been elevated for review on different grounds. Verily,
the dismissal of such cases appropriately ends useless litigations.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the
December 8, 2000 Decision2and the November 20, 2001 Resolution3 of the Court of Appeals
in CA-GR SP No. 57496. The assailed Decision disposed as follows:

"Assuming that petitioner is correct in saying that he has the exclusive right in
applying for the patent over the land in question, it appears that his action is already
barred by laches because he slept on his alleged right for almost 23 years from the
time the original certificate of title has been issued to respondent Manuel Palanca,
Jr., or after 35 years from the time the land was certified as agricultural land. In
addition, the proper party in the annulment of patents or titles acquired through fraud
is the State; thus, the petitioner’s action is deemed misplaced as he really does not
have any right to assert or protect. What he had during the time he requested for the
re-classification of the land was the privilege of applying for the patent over the same
upon the land’s conversion from forest to agricultural.

"WHEREFORE, the petition is hereby DISMISSED. No pronouncement as to cost."4

The assailed Resolution, on the other hand, denied the Motion for Reconsideration filed by
petitioner. It affirmed the RTC’s dismissal of his Complaint in Civil Case No. 3231, not on the
grounds relied upon by the trial court, but because of prescription and lack of jurisdiction.

The Antecedent Facts

The CA narrates the antecedent facts as follows:

"On August 2, 1963, herein [P]etitioner [George Katon] filed a request with the
District Office of the Bureau of Forestry in Puerto Princesa, Palawan, for the re-
classification of a piece of real property known as Sombrero Island, located in
Tagpait, Aborlan, Palawan, which consists of approximately 18 hectares. Said
property is within Timberland Block of LC Project No. 10-C of Aborlan, Palawan, per
BF Map LC No. 1582.
"Thereafter, the Bureau of Forestry District Office, Puerto Princesa, Palawan,
ordered the inspection, investigation and survey of the land subject of the petitioner’s
request for eventual conversion or re-classification from forest to agricultural land,
and thereafter for George Katon to apply for a homestead patent.

"Gabriel Mandocdoc (now retired Land Classification Investigator) undertook the


investigation, inspection and survey of the area in the presence of the petitioner, his
brother Rodolfo Katon (deceased) and his cousin, [R]espondent Manuel Palanca, Jr.
During said survey, there were no actual occupants on the island but there were
some coconut trees claimed to have been planted by petitioner and [R]espondent
Manuel Palanca, Jr. (alleged overseer of petitioner) who went to the island from time
to time to undertake development work, like planting of additional coconut trees.

"The application for conversion of the whole Sombrero Island was favorably
endorsed by the Forestry District Office of Puerto Princesa to its main office in Manila
for appropriate action. The names of Felicisimo Corpuz, Clemente Magdayao and
Jesus Gapilango and Juan Fresnillo were included in the endorsement as co-
applicants of the petitioner.

"In a letter dated September 23, 1965, then Asst. Director of Forestry R.J.L. Utleg
informed the Director of Lands, Manila, that since the subject land was no longer
needed for forest purposes, the same is therefore certified and released as
agricultural land for disposition under the Public Land Act.

"Petitioner contends that the whole area known as Sombrero Island had been
classified from forest land to agricultural land and certified available for disposition
upon his request and at his instance. However, Mr. Lucio Valera, then [l]and
investigator of the District Land Office, Puerto Princesa, Palawan, favorably
endorsed the request of [R]espondents Manuel Palanca Jr. and Lorenzo Agustin, for
authority to survey on November 15, 1965. On November 22, a second endorsement
was issued by Palawan District Officer Diomedes De Guzman with specific
instruction to survey vacant portions of Sombrero Island for the respondents
consisting of five (5) hectares each. On December 10, 1965, Survey Authority No. R
III-342-65 was issued authorizing Deputy Public Land Surveyor Eduardo Salvador to
survey ten (10) hectares of Sombrero Island for the respondents. On December 23,
1990, [R]espondent Lorenzo Agustin filed a homestead patent application for a
portion of the subject island consisting of an area of 4.3 hectares.

"Records show that on November 8, 1996, [R]espondent Juan Fresnillo filed a


homestead patent application for a portion of the island comprising 8.5 hectares.
Records also reveal that [R]espondent Jesus Gapilango filed a homestead
application on June 8, 1972. Respondent Manuel Palanca, Jr. was issued
Homestead Patent No. 145927 and OCT No. G-7089 on March 3, 19775 with an area
of 6.84 hectares of Sombrero Island.

"Petitioner assails the validity of the homestead patents and original certificates of
title covering certain portions of Sombrero Island issued in favor of respondents on
the ground that the same were obtained through fraud. Petitioner prays for the
reconveyance of the whole island in his favor.

"On the other hand, [R]espondent Manuel Palanca, Jr. claims that he himself
requested for the reclassification of the island in dispute and that on or about the time
of such request, [R]espondents Fresnillo, Palanca and Gapilango already occupied
their respective areas and introduced numerous improvements. In addition, Palanca
said that petitioner never filed any homestead application for the island. Respondents
deny that Gabriel Mandocdoc undertook the inspection and survey of the island.

"According to Mandocdoc, the island was uninhabited but the respondents insist that
they already had their respective occupancy and improvements on the island.
Palanca denies that he is a mere overseer of the petitioner because he said he was
acting for himself in developing his own area and not as anybody’s caretaker.

"Respondents aver that they are all bona fide and lawful possessors of their
respective portions and have declared said portions for taxation purposes and that
they have been faithfully paying taxes thereon for twenty years.

"Respondents contend that the petitioner has no legal capacity to sue insofar as the
island is concerned because an action for reconveyance can only be brought by the
owner and not a mere homestead applicant and that petitioner is guilty of estoppel by
laches for his failure to assert his right over the land for an unreasonable and
unexplained period of time.

"In the instant case, petitioner seeks to nullify the homestead patents and original
certificates of title issued in favor of the respondents covering certain portions of the
Sombrero Island as well as the reconveyance of the whole island in his favor. The
petitioner claims that he has the exclusive right to file an application for homestead
patent over the whole island since it was he who requested for its conversion from
forest land to agricultural land."6

Respondents filed their Answer with Special and/or Affirmative Defenses and Counterclaim
in due time. On June 30, 1999, they also filed a Motion to Dismiss on the ground of the
alleged defiance by petitioner of the trial court’s Order to amend his Complaint so he could
thus effect a substitution by the legal heirs of the deceased, Respondent Gapilango. The
Motion to Dismiss was granted by the RTC in its Order dated July 29, 1999.

Petitioner’s Motion for Reconsideration of the July 29, 1999 Order was denied by the trial
court in its Resolution dated December 17, 1999, for being a third and prohibited motion. In
his Petition for Certiorari before the CA, petitioner charged the trial court with grave abuse of
discretion on the ground that the denied Motion was his first and only Motion for
Reconsideration of the aforesaid Order.

Ruling of the Court of Appeals

Instead of limiting itself to the allegation of grave abuse of discretion, the CA ruled on the
merits. It held that while petitioner had caused the reclassification of Sombrero Island from
forest to agricultural land, he never applied for a homestead patent under the Public Land
Act. Hence, he never acquired title to that land.

The CA added that the annulment and cancellation of a homestead patent and the reversion
of the property to the State were matters between the latter and the homestead grantee.
Unless and until the government takes steps to annul the grant, the homesteader’s right
thereto stands.
Finally, granting arguendo that petitioner had the exclusive right to apply for a patent to the
land in question, he was already barred by laches for having slept on his right for almost 23
years from the time Respondent Palanca’s title had been issued.

In the Assailed Resolution, the CA acknowledged that it had erred when it ruled on the merits
of the case. It agreed with petitioner that the trial court had acted without jurisdiction in
perfunctorily dismissing his September 10, 1999 Motion for Reconsideration, on the
erroneous ground that it was a third and prohibited motion when it was actually only his first
motion.

Nonetheless, the Complaint was dismissed motu proprio by the challenged Resolution of the
CA Special Division of five members – with two justices dissenting – pursuant to its "residual
prerogative" under Section 1 of Rule 9 of the Rules of Court.

From the allegations of the Complaint, the appellate court opined that petitioner clearly had
no standing to seek reconveyance of the disputed land, because he neither held title to it nor
even applied for a homestead patent. It reiterated that only the State could sue for
cancellation of the title issued upon a homestead patent, and for reversion of the land to the
public domain.

Finally, it ruled that prescription had already barred the action for reconveyance. First,
petitioner’s action was brought 24 years after the issuance of Palanca’s homestead patent.
Under the Public Land Act, such action should have been taken within ten years from the
issuance of the homestead certificate of title. Second, it appears from the submission (Annex
"F" of the Complaint) of petitioner himself that Respondents Fresnillo and Palanca had been
occupying six hectares of the island since 1965, or 33 years before he took legal steps to
assert his right to the property. His action was filed beyond the 30-year prescriptive period
under Articles 1141 and 1137 of the Civil Code.

Hence, this Petition.7

Issues

In his Memorandum, petitioner raises the following issues:

"1. Is the Court of Appeals correct in resolving the Petition for Certiorari based on an
issue not raised (the merits of the case) in the Petition?

"2. Is the Court of Appeals correct in invoking its alleged ‘residual prerogative’ under
Section 1, Rule 9 of the 1997 Rules of Civil Procedure in resolving the Petition on an
issue not raised in the Petition?"8

The Court’s Ruling

The Petition has no merit.

First Issue:

Propriety of Ruling on the Merits


This is not the first time that petitioner has taken issue with the propriety of the CA’s ruling on
the merits. He raised it with the appellate court when he moved for reconsideration of its
December 8, 2000 Decision. The CA even corrected itself in its November 20, 2001
Resolution, as follows:

"Upon another review of the case, the Court concedes that it may indeed have lost its
way and been waylaid by the variety, complexity and seeming importance of the
interests and issues involved in the case below, the apparent reluctance of the
judges, five in all, to hear the case, and the volume of the conflicting, often confusing,
submissions bearing on incidental matters. We stand corrected."9

That explanation should have been enough to settle the issue. The CA’s Resolution on this
point has rendered petitioner’s issue moot. Hence, there is no need to discuss it further.
Suffice it to say that the appellate court indeed acted ultra jurisdictio in ruling on the merits of
the case when the only issue that could have been, and was in fact, raised was the alleged
grave abuse of discretion committed by the trial court in denying petitioner’s Motion for
Reconsideration. Settled is the doctrine that the sole office of a writ of certiorari is the
correction of errors of jurisdiction. Such writ does not include a review of the
evidence,10 more so when no determination of the merits has yet been made by the trial
court, as in this case.

Second Issue:

Dismissal for Prescription and Lack of Jurisdiction

Petitioner next submits that the CA erroneously invoked its "residual prerogatives" under
Section 1 of Rule 9 of the Rules of Court when it motu proprio dismissed the Petition for lack
of jurisdiction and prescription. According to him, residual prerogative refers to the power that
the trial court, in the exercise of its original jurisdiction, may still validly exercise even after
perfection of an appeal. It follows that such powers are not possessed by an appellate court.

Petitioner has confused what the CA adverted to as its "residual prerogatives" under Section
1 of Rule 9 of the Rules of Court with the "residual jurisdiction" of trial courts over cases
appealed to the CA.

Under Section 1 of Rule 9 of the Rules of Court, defenses and objections not pleaded either
in a motion to dismiss or in the answer are deemed waived, except when (1) lack of
jurisdiction over the subject matter, (2) litis pendentia, (3) res judicata and (4) prescription are
evident from the pleadings or the evidence on record. In the four excepted instances, the
court shall motu proprio dismiss the claim or action. In Gumabon v. Larin11 we explained
thus:

"x x x [T]he motu proprio dismissal of a case was traditionally limited to instances
when the court clearly had no jurisdiction over the subject matter and when the
plaintiff did not appear during trial, failed to prosecute his action for an unreasonable
length of time or neglected to comply with the rules or with any order of the court.
Outside of these instances, any motu proprio dismissal would amount to a violation
of the right of the plaintiff to be heard. Except for qualifying and expanding Section 2,
Rule 9, and Section 3, Rule 17, of the Revised Rules of Court, the amendatory 1997
Rules of Civil Procedure brought about no radical change. Under the new rules, a
court may motu proprio dismiss a claim when it appears from the pleadings or
evidence on record that it has no jurisdiction over the subject matter; when there is
another cause of action pending between the same parties for the same cause, or
where the action is barred by a prior judgment or by statute of limitations. x x
x."12 (Italics supplied)

On the other hand, "residual jurisdiction" is embodied in Section 9 of Rule 41 of the Rules of
Court, as follows:

"SEC. 9. Perfection of appeal; effect thereof. – A party’s appeal by notice of appeal is


deemed perfected as to him upon the filing of the notice of appeal in due time.

"A party’s appeal by record on appeal is deemed perfected as to him with respect to
the subject matter thereof upon the approval of the record on appeal filed in due
time.

"In appeals by notice of appeal, the court loses jurisdiction over the case upon the
perfection of the appeals filed in due time and the expiration of the time to appeal of
the other parties.

"In appeals by record on appeal, the court loses jurisdiction only over the subject
matter thereof upon the approval of the records on appeal filed in due time and the
expiration of the time to appeal of the other parties.

"In either case, prior to the transmittal of the original record or the record on appeal,
the court may issue orders for the protection and preservation of the rights of the
parties which do not involve any matter litigated by the appeal, approve
compromises, permit appeals of indigent litigants, order execution pending appeal in
accordance with Section 2 of Rule 39, and allow withdrawal of the appeal." (Italics
supplied)

The "residual jurisdiction" of trial courts is available at a stage in which the court is normally
deemed to have lost jurisdiction over the case or the subject matter involved in the appeal.
This stage is reached upon the perfection of the appeals by the parties or upon the approval
of the records on appeal, but prior to the transmittal of the original records or the records on
appeal.13 In either instance, the trial court still retains its so-called residual jurisdiction to
issue protective orders, approve compromises, permit appeals of indigent litigants, order
execution pending appeal, and allow the withdrawal of the appeal.

The CA’s motu proprio dismissal of petitioner’s Complaint could not have been based,
therefore, on residual jurisdiction under Rule 41. Undeniably, such order of dismissal was not
one for the protection and preservation of the rights of the parties, pending the disposition of
the case on appeal. What the CA referred to as residual prerogatives were the general
residual powers of the courts to dismiss an action motu proprio upon the grounds mentioned
in Section 1 of Rule 9 of the Rules of Court and under authority of Section 2 of Rule 114 of the
same rules.

To be sure, the CA had the excepted instances in mind when it dismissed the Complaint
motu proprio "on more fundamental grounds directly bearing on the lower court’s lack of
jurisdiction"15 and for prescription of the action. Indeed, when a court has no jurisdiction over
the subject matter, the only power it has is to dismiss the action.16

Jurisdiction over the subject matter is conferred by law and is determined by the allegations
in the complaint and the character of the relief sought.17 In his Complaint for "Nullification of
Applications for Homestead and Original Certificate of Title No. G-7089 and for
Reconveyance of Title,"18 petitioner averred:

"2. That on November 10, 1965, without the knowledge of [petitioner, Respondent]
Manuel Palanca Jr., [petitioner’s] cousin, in connivance with his co-[respondent],
Lorenzo Agustin, x x x fraudulently and in bad faith:

2.1. x x x made the request for authority to survey as a pre-requisite to the


filing of an application for homestead patent in his name and that of his Co-
[Respondent] Agustin, [despite being] fully aware that [Petitioner] KATON
had previously applied or requested for re-classification and certification of
the same land from forest land to agricultural land which request was
favorably acted upon and approved as mentioned earlier; a clear case of
intrinsic fraud and misrepresentation;

xxx xxx xxx

2.3. In stating in his application for homestead patent that he was applying for
the VACANT PORTION of Sombrero Island where there was none, the same
constituted another clear case of fraud and misrepresentation;

"3. That the issuance of Homestead Patent No. 145927 and OCT No. G-7089 in the
name of [Respondent] Manuel Palanca Jr. and the filing of Homestead Patent
Applications in the names of [respondents], Lorenzo Agustin, Jesus Gapilango and
Juan Fresnillo[,] having been done fraudulently and in bad faith, are ipso facto null
and void and of no effect whatsoever."19

xxx xxx xxx

"x x x. By a wrongful act or a willful omission and intending the effects with natural
necessity arise knowing from such act or omission, [Respondent Palanca] on
account of his blood relation, first degree cousins, trust, interdependence and
intimacy is guilty of intrinsic fraud [sic]. x x x."20

Thereupon, petitioner prayed, among others, for a judgment (1) nullifying the homestead
patent applications of Respondents Agustin, Fresnillo and Gapilango as well as Homestead
Patent No. 145927 and OCT No. G-7089 in the name of Respondent Palanca; and (2)
ordering the director of the Land Management Bureau to reconvey the Sombrero Island to
petitioner.21

The question is, did the Complaint sufficiently allege an action for declaration of nullity of the
free patent and certificate of title or, alternatively, for reconveyance? Or did it plead merely
for reversion?

The Complaint did not sufficiently make a case for any of such actions, over which the trial
court could have exercised jurisdiction.

In an action for nullification of title or declaration of its nullity, the complaint must contain the
following allegations: 1) that the contested land was privately owned by the plaintiff prior to
the issuance of the assailed certificate of title to the defendant; and 2) that the defendant
perpetuated a fraud or committed a mistake in obtaining a document of title over the parcel
of land claimed by the plaintiff.22 In these cases, the nullity arises not from fraud or deceit, but
from the fact that the director of the Land Management Bureau had no jurisdiction to bestow
title; hence, the issued patent or certificate of title was void ab initio.23

In an alternative action for reconveyance, the certificate of title is also respected as


incontrovertible, but the transfer of the property or title thereto is sought to be nullified on the
ground that it was wrongfully or erroneously registered in the defendant’s name.24 As with an
annulment of title, a complaint must allege two facts that, if admitted, would entitle the
plaintiff to recover title to the disputed land: (1) that the plaintiff was the owner of the land,
and (2) that the defendant illegally dispossessed the plaintiff of the property.25 Therefore, the
defendant who acquired the property through mistake or fraud is bound to hold and reconvey
to the plaintiff the property or the title thereto.26

In the present case, nowhere in the Complaint did petitioner allege that he had previously
held title to the land in question. On the contrary, he acknowledged that the disputed island
was public land,27 that it had never been privately titled in his name, and that he had not
applied for a homestead under the provisions of the Public Land Act.28 This Court has held
that a complaint by a private party who alleges that a homestead patent was obtained by
fraudulent means, and who consequently prays for its annulment, does not state a cause of
action; hence, such complaint must be dismissed.29

Neither can petitioner’s case be one for reversion. Section 101 of the Public Land Act
categorically declares that only the solicitor general or the officer in his stead may institute
such an action.30 A private person may not bring an action for reversion or any other action
that would have the effect of canceling a free patent and its derivative title, with the result
that the land thereby covered would again form part of the public domain.31

Thus, when the plaintiff admits in the complaint that the disputed land will revert to the public
domain even if the title is canceled or amended, the action is for reversion; and the proper
party who may bring action is the government, to which the property will revert.32 A mere
homestead applicant, not being the real party in interest, has no cause of action in a suit for
reconveyance.33 As it is, vested rights over the land applied for under a homestead may be
validly claimed only by the applicant, after approval by the director of the Land Management
Bureau of the former’s final proof of homestead patent.34

Consequently, the dismissal of the Complaint is proper not only because of lack of
jurisdiction, but also because of the utter absence of a cause of action,35 a defense raised by
respondents in their Answer.36 Section 2 of Rule 3 of the Rules of Court37 ordains that every
action must be prosecuted or defended in the name of the real party in interest, who stands
to be benefited or injured by the judgment in the suit. Indeed, one who has no right or
interest to protect has no cause of action by which to invoke, as a party-plaintiff, the
jurisdiction of the court.38

Finally, assuming that petitioner is the proper party to bring the action for annulment of title or
its reconveyance, the case should still be dismissed for being time-barred.39 It is not disputed
that a homestead patent and an Original Certificate of Title was issued to Palanca on
February 21, 1977,40 while the Complaint was filed only on October 6, 1998. Clearly, the suit
was brought way past ten years from the date of the issuance of the Certificate, the
prescriptive period for reconveyance of fraudulently registered real property.41

It must likewise be stressed that Palanca’s title -- which attained the status of indefeasibility
one year from the issuance of the patent and the Certificate of Title in February 1977 -- is no
longer open to review on the ground of actual fraud. Ybanez v. Intermediate Appellate
Court42 ruled that a certificate of title, issued under an administrative proceeding pursuant to
a homestead patent, is as indefeasible as one issued under a judicial registration proceeding
one year from its issuance; provided, however, that the land covered by it is disposable
public land, as in this case.

In Aldovino v. Alunan,43 the Court has held that when the plaintiff’s own complaint shows
clearly that the action has prescribed, such action may be dismissed even if the defense of
prescription has not been invoked by the defendant. In Gicano v. Gegato,44 we also
explained thus:

"x x x [T]rial courts have authority and discretion to dismiss an action on the ground
of prescription when the parties' pleadings or other facts on record show it to be
indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G.
97; Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958;
Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA
408); and it may do so on the basis of a motion to dismiss (Sec. 1,f, Rule 16, Rules
of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5,
Rule 16), or even if the ground is alleged after judgment on the merits, as in a motion
for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not
been asserted at all, as where no statement thereof is found in the pleadings (Garcia
v. Mathis, 100 SCRA 250; PNB v. Pacific Commission House, 27 SCRA 766; Chua
Lamco v. Dioso, et al., 97 Phil. 821); or where a defendant has been declared in
default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is that the
facts demonstrating the lapse of the prescriptive period be otherwise sufficiently and
satisfactorily apparent on the record; either in the averments of the plaintiff's
complaint, or otherwise established by the evidence."45 (Italics supplied)

Clearly then, the CA did not err in dismissing the present case. After all, if and when they are
able to do so, courts must endeavor to settle entire controversies before them to prevent
future litigations.46

WHEREFORE, the Petition is hereby DENIED, and the assailed Resolution AFFIRMED. The
dismissal of the Complaint in Civil Case No. 3231 is SUSTAINED on the grounds of lack of
jurisdiction, failure to state a cause of action and prescription. Costs against petitioner.

SO ORDERED.
G.R. No. 147406 July 14, 2008

VENANCIO FIGUEROA y CERVANTES,1 Petitioner,


vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

NACHURA, J.:

When is a litigant estopped by laches from assailing the jurisdiction of a tribunal? This is the
paramount issue raised in this petition for review of the February 28, 2001 Decision2 of the
Court of Appeals (CA) in CA-G.R. CR No. 22697.

Pertinent are the following antecedent facts and proceedings:

On July 8, 1994, an information3 for reckless imprudence resulting in homicide was filed
against the petitioner before the Regional Trial Court (RTC) of Bulacan, Branch 18.4 The
case was docketed as Criminal Case No. 2235-M-94.5 Trial on the merits ensued and on
August 19, 1998, the trial court convicted the petitioner as charged.6 In his appeal before the
CA, the petitioner questioned, among others, for the first time, the trial court’s jurisdiction.7

The appellate court, however, in the challenged decision, considered the petitioner to have
actively participated in the trial and to have belatedly attacked the jurisdiction of the RTC;
thus, he was already estopped by laches from asserting the trial court’s lack of jurisdiction.
Finding no other ground to reverse the trial court’s decision, the CA affirmed the petitioner’s
conviction but modified the penalty imposed and the damages awarded.8

Dissatisfied, the petitioner filed the instant petition for review on certiorari raising the
following issues for our resolution:

a. Does the fact that the petitioner failed to raise the issue of jurisdiction during the
trial of this case, which was initiated and filed by the public prosecutor before the
wrong court, constitute laches in relation to the doctrine laid down in Tijam v.
Sibonghanoy, notwithstanding the fact that said issue was immediately raised in
petitioner’s appeal to the Honorable Court of Appeals? Conversely, does the active
participation of the petitioner in the trial of his case, which is initiated and filed not by
him but by the public prosecutor, amount to estoppel?

b. Does the admission of the petitioner that it is difficult to immediately stop a bus
while it is running at 40 kilometers per hour for the purpose of avoiding a person who
unexpectedly crossed the road, constitute enough incriminating evidence to warrant
his conviction for the crime charged?

c. Is the Honorable Court of Appeals justified in considering the place of accident as


falling within Item 4 of Section 35 (b) of the Land Transportation and Traffic Code,
and subsequently ruling that the speed limit thereto is only 20 kilometers per hour,
when no evidence whatsoever to that effect was ever presented by the prosecution
during the trial of this case?
d. Is the Honorable Court of Appeals justified in convicting the petitioner for homicide
through reckless imprudence (the legally correct designation is "reckless imprudence
resulting to homicide") with violation of the Land Transportation and Traffic
Code when the prosecution did not prove this during the trial and, more importantly,
the information filed against the petitioner does not contain an allegation to that
effect?

e. Does the uncontroverted testimony of the defense witness Leonardo Hernal that
the victim unexpectedly crossed the road resulting in him getting hit by the bus driven
by the petitioner not enough evidence to acquit him of the crime charged?9

Applied uniformly is the familiar rule that the jurisdiction of the court to hear and decide a
case is conferred by the law in force at the time of the institution of the action, unless such
statute provides for a retroactive application thereof.10 In this case, at the time the criminal
information for reckless imprudence resulting in homicide with violation of the Automobile
Law (now Land Transportation and Traffic Code) was filed, Section 32(2) of Batas
Pambansa (B.P.) Blg. 12911 had already been amended by Republic Act No. 7691.12 The
said provision thus reads:

Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit
Trial Courts in Criminal Cases.—Except in cases falling within the exclusive original
jurisdiction of Regional Trial Courts and the Sandiganbayan, the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

xxxx

(2) Exclusive original jurisdiction over all offenses punishable with imprisonment not
exceeding six (6) years irrespective of the amount of fine, and regardless of other imposable
accessory or other penalties, including the civil liability arising from such offenses or
predicated thereon, irrespective of kind, nature, value or amount thereof: Provided, however,
That in offenses involving damage to property through criminal negligence, they shall have
exclusive original jurisdiction thereof.

As the imposable penalty for the crime charged herein is prision correccional in its medium
and maximum periods or imprisonment for 2 years, 4 months and 1 day to 6
years,13 jurisdiction to hear and try the same is conferred on the Municipal Trial Courts
(MTCs). Clearly, therefore, the RTC of Bulacan does not have jurisdiction over Criminal
Case No. 2235-M-94.

While both the appellate court and the Solicitor General acknowledge this fact, they
nevertheless are of the position that the principle of estoppel by laches has already
precluded the petitioner from questioning the jurisdiction of the RTC—the trial went on for 4
years with the petitioner actively participating therein and without him ever raising the
jurisdictional infirmity. The petitioner, for his part, counters that the lack of jurisdiction of a
court over the subject matter may be raised at any time even for the first time on appeal. As
undue delay is further absent herein, the principle of laches will not be applicable.

To settle once and for all this problem of jurisdiction vis-à-vis estoppel by laches, which
continuously confounds the bench and the bar, we shall analyze the various Court decisions
on the matter.
As early as 1901, this Court has declared that unless jurisdiction has been conferred by
some legislative act, no court or tribunal can act on a matter submitted to it.14 We went on to
state in U.S. v. De La Santa15 that:

It has been frequently held that a lack of jurisdiction over the subject-matter is fatal, and
subject to objection at any stage of the proceedings, either in the court below or on appeal
(Ency. of Pl. & Pr., vol. 12, p. 189, and large array of cases there cited), and indeed, where
the subject-matter is not within the jurisdiction, the court may dismiss the proceeding ex
mero motu. (4 Ill., 133; 190 Ind., 79; Chipman vs. Waterbury, 59 Conn., 496.)

Jurisdiction over the subject-matter in a judicial proceeding is conferred by the sovereign


authority which organizes the court; it is given only by law and in the manner prescribed by
law and an objection based on the lack of such jurisdiction can not be waived by the parties.
x x x16

Later, in People v. Casiano,17 the Court explained:

4. The operation of the principle of estoppel on the question of jurisdiction seemingly


depends upon whether the lower court actually had jurisdiction or not. If it had no jurisdiction,
but the case was tried and decided upon the theory that it had jurisdiction, the parties are not
barred, on appeal, from assailing such jurisdiction, for the same "must exist as a matter of
law, and may not be conferred by consent of the parties or by estoppel" (5 C.J.S., 861-863).
However, if the lower court had jurisdiction, and the case was heard and decided upon a
given theory, such, for instance, as that the court had no jurisdiction, the party who induced it
to adopt such theory will not be permitted, on appeal, to assume an inconsistent position—
that the lower court had jurisdiction. Here, the principle of estoppel applies. The rule that
jurisdiction is conferred by law, and does not depend upon the will of the parties, has no
bearing thereon. Thus, Corpus Juris Secundum says:

Where accused has secured a decision that the indictment is void, or has been granted an
instruction based on its defective character directing the jury to acquit, he is estopped, when
subsequently indicted, to assert that the former indictment was valid. In such case, there
may be a new prosecution whether the indictment in the former prosecution was good or
bad. Similarly, where, after the jury was impaneled and sworn, the court on accused's motion
quashed the information on the erroneous assumption that the court had no jurisdiction,
accused cannot successfully plead former jeopardy to a new information. x x x (22 C.J.S.,
sec. 252, pp. 388-389; italics ours.)

Where accused procured a prior conviction to be set aside on the ground that the court was
without jurisdiction, he is estopped subsequently to assert, in support of a defense of
previous jeopardy, that such court had jurisdiction." (22 C.J.S. p. 378.)18

But in Pindañgan Agricultural Co., Inc. v. Dans,19 the Court, in not sustaining the plea of lack
of jurisdiction by the plaintiff-appellee therein, made the following observations:

It is surprising why it is only now, after the decision has been rendered, that the plaintiff-
appellee presents the question of this Court’s jurisdiction over the case. Republic Act No.
2613 was enacted on August 1, 1959. This case was argued on January 29, 1960.
Notwithstanding this fact, the jurisdiction of this Court was never impugned until the adverse
decision of this Court was handed down. The conduct of counsel leads us to believe that
they must have always been of the belief that notwithstanding said enactment of Republic
Act 2613 this Court has jurisdiction of the case, such conduct being born out of a conviction
that the actual real value of the properties in question actually exceeds the jurisdictional
amount of this Court (over ₱200,000). Our minute resolution in G.R. No. L-10096, Hyson
Tan, et al. vs. Filipinas Compaña de Seguros, et al., of March 23, 1956, a parallel case, is
applicable to the conduct of plaintiff-appellee in this case, thus:

x x x that an appellant who files his brief and submits his case to the Court of Appeals for
decision, without questioning the latter’s jurisdiction until decision is rendered therein, should
be considered as having voluntarily waived so much of his claim as would exceed the
jurisdiction of said Appellate Court; for the reason that a contrary rule would encourage the
undesirable practice of appellants submitting their cases for decision to the Court of Appeals
in expectation of favorable judgment, but with intent of attacking its jurisdiction should the
decision be unfavorable: x x x20

Then came our ruling in Tijam v. Sibonghanoy21 that a party may be barred by laches from
invoking lack of jurisdiction at a late hour for the purpose of annulling everything done in the
case with the active participation of said party invoking the plea. We expounded, thus:

A party may be estopped or barred from raising a question in different ways and for different
reasons. Thus, we speak of estoppel in pais, of estoppel by deed or by record, and of
estoppel by laches.

Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained length
of time, to do that which, by exercising due diligence, could or should have been done
earlier; it is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it.

The doctrine of laches or of "stale demands" is based upon grounds of public policy which
requires, for the peace of society, the discouragement of stale claims and, unlike the statute
of limitations, is not a mere question of time but is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or asserted.

It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative
relief against his opponent and, after obtaining or failing to obtain such relief, repudiate or
question that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just
cited, by way of explaining the rule, it was further said that the question whether the court
had jurisdiction either of the subject matter of the action or of the parties was not important in
such cases because the party is barred from such conduct not because the judgment or
order of the court is valid and conclusive as an adjudication, but for the reason that such a
practice cannot be tolerated—obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering
an adverse decision on the merits, it is too late for the loser to question the jurisdiction or
power of the court (Pease vs. Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S.Ct.
283; St. Louis etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16
Wyo. 58, the Court said that it is not right for a party who has affirmed and invoked the
jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny
that same jurisdiction to escape a penalty.

Upon this same principle is what We said in the three cases mentioned in the resolution of
the Court of Appeals of May 20, 1963 (supra)—to the effect that we frown upon the
"undesirable practice" of a party submitting his case for decision and then accepting the
judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse—as well as
in Pindañgan etc. vs. Dans et al., G.R. L-14591, September 26, 1962; Montelibano et al. vs.
Bacolod-Murcia Milling Co., Inc., G.R. L-15092; Young Men Labor Union etc. vs. The Court
of Industrial Relations et al., G.R. L-20307, Feb. 26, 1965, and Mejia vs. Lucas, 100 Phil. p.
277.

The facts of this case show that from the time the Surety became a quasi-party on July 31,
1948, it could have raised the question of the lack of jurisdiction of the Court of First Instance
of Cebu to take cognizance of the present action by reason of the sum of money involved
which, according to the law then in force, was within the original exclusive jurisdiction of
inferior courts. It failed to do so. Instead, at several stages of the proceedings in the court a
quo, as well as in the Court of Appeals, it invoked the jurisdiction of said courts to obtain
affirmative relief and submitted its case for a final adjudication on the merits. It was only after
an adverse decision was rendered by the Court of Appeals that it finally woke up to raise the
question of jurisdiction. Were we to sanction such conduct on its part, We would in effect be
declaring as useless all the proceedings had in the present case since it was commenced on
July 19, 1948 and compel the judgment creditors to go up their Calvary once more. The
inequity and unfairness of this is not only patent but revolting.22

For quite a time since we made this pronouncement in Sibonghanoy, courts and tribunals, in
resolving issues that involve the belated invocation of lack of jurisdiction, have applied the
principle of estoppel by laches. Thus, in Calimlim v. Ramirez,23 we pointed out that
Sibonghanoy was developing into a general rule rather than the exception:

A rule that had been settled by unquestioned acceptance and upheld in decisions so
numerous to cite is that the jurisdiction of a court over the subject-matter of the action is a
matter of law and may not be conferred by consent or agreement of the parties. The lack of
jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This
doctrine has been qualified by recent pronouncements which stemmed principally from the
ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said
case had been applied to situations which were obviously not contemplated therein. The
exceptional circumstance involved in Sibonghanoy which justified the departure from the
accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead
a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in
Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing
altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by
estoppel.

In Sibonghanoy, the defense of lack of jurisdiction of the court that rendered the questioned
ruling was held to be barred by estoppel by laches. It was ruled that the lack of jurisdiction
having been raised for the first time in a motion to dismiss filed almost fifteen (15) years after
the questioned ruling had been rendered, such a plea may no longer be raised for being
barred by laches. As defined in said case, laches is "failure or neglect, for an unreasonable
and unexplained length of time, to do that which, by exercising due diligence, could or should
have been done earlier; it is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert has abandoned it or declined
to assert it.24

In Calimlim, despite the fact that the one who benefited from the plea of lack of jurisdiction
was the one who invoked the court’s jurisdiction, and who later obtained an adverse
judgment therein, we refused to apply the ruling in Sibonghanoy. The Court accorded
supremacy to the time-honored principle that the issue of jurisdiction is not lost by waiver or
by estoppel.
Yet, in subsequent cases decided after Calimlim, which by sheer volume are too plentiful to
mention, the Sibonghanoy doctrine, as foretold in Calimlim, became the rule rather than the
exception. As such, in Soliven v. Fastforms Philippines, Inc.,25 the Court ruled:

While it is true that jurisdiction may be raised at any time, "this rule presupposes that
estoppel has not supervened." In the instant case, respondent actively participated in all
stages of the proceedings before the trial court and invoked its authority by asking for an
affirmative relief. Clearly, respondent is estopped from challenging the trial court’s
jurisdiction, especially when an adverse judgment has been rendered. In PNOC Shipping
and Transport Corporation vs. Court of Appeals, we held:

Moreover, we note that petitioner did not question at all the jurisdiction of the lower court x x
x in its answers to both the amended complaint and the second amended complaint. It did so
only in its motion for reconsideration of the decision of the lower court after it had received an
adverse decision. As this Court held in Pantranco North Express, Inc. vs. Court of Appeals
(G.R. No. 105180, July 5, 1993, 224 SCRA 477, 491), participation in all stages of the case
before the trial court, that included invoking its authority in asking for affirmative relief,
effectively barred petitioner by estoppel from challenging the court’s jurisdiction. Notably,
from the time it filed its answer to the second amended complaint on April 16, 1985,
petitioner did not question the lower court’s jurisdiction. It was only on December 29, 1989
when it filed its motion for reconsideration of the lower court’s decision that petitioner raised
the question of the lower court’s lack of jurisdiction. Petitioner thus foreclosed its right to
raise the issue of jurisdiction by its own inaction. (italics ours)

Similarly, in the subsequent case of Sta. Lucia Realty and Development, Inc. vs. Cabrigas,
we ruled:

In the case at bar, it was found by the trial court in its 30 September 1996 decision in LCR
Case No. Q-60161(93) that private respondents (who filed the petition for reconstitution of
titles) failed to comply with both sections 12 and 13 of RA 26 and therefore, it had no
jurisdiction over the subject matter of the case. However, private respondents never
questioned the trial court’s jurisdiction over its petition for reconstitution throughout the
duration of LCR Case No. Q-60161(93). On the contrary, private respondents actively
participated in the reconstitution proceedings by filing pleadings and presenting its evidence.
They invoked the trial court’s jurisdiction in order to obtain affirmative relief – the
reconstitution of their titles. Private respondents have thus foreclosed their right to raise the
issue of jurisdiction by their own actions.

The Court has constantly upheld the doctrine that while jurisdiction may be assailed at any
stage, a litigant’s participation in all stages of the case before the trial court, including the
invocation of its authority in asking for affirmative relief, bars such party from challenging the
court’s jurisdiction (PNOC Shipping and Transport Corporation vs. Court of Appeals, 297
SCRA 402 [1998]). A party cannot invoke the jurisdiction of a court to secure affirmative relief
against his opponent and after obtaining or failing to obtain such relief, repudiate or question
that same jurisdiction (Asset Privatization Trust vs. Court of Appeals, 300 SCRA 579
[1998]; Province of Bulacan vs. Court of Appeals, 299 SCRA 442 [1998]). The Court frowns
upon the undesirable practice of a party participating in the proceedings and submitting his
case for decision and then accepting judgment, only if favorable, and attacking it for lack of
jurisdiction, when adverse (Producers Bank of the Philippines vs. NLRC, 298 SCRA 517
[1998], citing Ilocos Sur Electric Cooperative, Inc. vs. NLRC, 241 SCRA 36 [1995]). (italics
ours)26
Noteworthy, however, is that, in the 2005 case of Metromedia Times Corporation v.
Pastorin,27 where the issue of lack of jurisdiction was raised only in the National Labor
Relations Commission (NLRC) on appeal, we stated, after examining the doctrines of
jurisdiction vis-à-vis estoppel, that the ruling in Sibonghanoy stands as an exception, rather
than the general rule. Metromedia, thus, was not estopped from assailing the jurisdiction of
the labor arbiter before the NLRC on appeal.28 1avvphi1

Later, in Francel Realty Corporation v. Sycip,29 the Court clarified that:

Petitioner argues that the CA’s affirmation of the trial court’s dismissal of its case was
erroneous, considering that a full-blown trial had already been conducted. In effect, it
contends that lack of jurisdiction could no longer be used as a ground for dismissal after trial
had ensued and ended.

The above argument is anchored on estoppel by laches, which has been used quite
successfully in a number of cases to thwart dismissals based on lack of jurisdiction. Tijam v.
Sibonghanoy, in which this doctrine was espoused, held that a party may be barred from
questioning a court’s jurisdiction after being invoked to secure affirmative relief against its
opponent. In fine, laches prevents the issue of lack of jurisdiction from being raised for the
first time on appeal by a litigant whose purpose is to annul everything done in a trial in which
it has actively participated.

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence, could or should have been done earlier; it
is negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert
it."

The ruling in Sibonghanoy on the matter of jurisdiction is, however, the exception rather than
the rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in
1avvphi1

cases in which the factual milieu is analogous to that in the cited case. In such controversies,
laches should be clearly present; that is, lack of jurisdiction must have been raised so
belatedly as to warrant the presumption that the party entitled to assert it had abandoned or
declined to assert it. That Sibonghanoy applies only to exceptional circumstances is clarified
in Calimlim v. Ramirez, which we quote:

A rule that had been settled by unquestioned acceptance and upheld in decisions so
numerous to cite is that the jurisdiction of a court over the subject-matter of the action is a
matter of law and may not be conferred by consent or agreement of the parties. The lack of
jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This
doctrine has been qualified by recent pronouncements which stemmed principally from the
ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said
case had been applied to situations which were obviously not contemplated therein. The
exceptional circumstance involved in Sibonghanoy which justified the departure from the
accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead
a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in
Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing
altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by
estoppel.

Indeed, the general rule remains: a court’s lack of jurisdiction may be raised at any stage of
the proceedings, even on appeal. The reason is that jurisdiction is conferred by law, and lack
of it affects the very authority of the court to take cognizance of and to render judgment on
the action. Moreover, jurisdiction is determined by the averments of the complaint, not by the
defenses contained in the answer.30

Also, in Mangaliag v. Catubig-Pastoral,31 even if the pleader of lack of jurisdiction actively


took part in the trial proceedings by presenting a witness to seek exoneration, the Court,
reiterating the doctrine in Calimlim, said:

Private respondent argues that the defense of lack of jurisdiction may be waived by estoppel
through active participation in the trial. Such, however, is not the general rule but an
exception, best characterized by the peculiar circumstances in Tijam vs. Sibonghanoy.
In Sibonghanoy, the party invoking lack of jurisdiction did so only after fifteen years and at a
stage when the proceedings had already been elevated to the CA. Sibonghanoy is an
exceptional case because of the presence of laches, which was defined therein as failure or
neglect for an unreasonable and unexplained length of time to do that which, by exercising
due diligence, could or should have been done earlier; it is the negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to
assert has abandoned it or declined to assert it.32

And in the more recent Regalado v. Go,33 the Court again emphasized that laches should be
clearly present for the Sibonghanoy doctrine to be applicable, thus:

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence, could or should have been done earlier, it
is negligence or omission to assert a right within a reasonable length of time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert
it."

The ruling in People v. Regalario that was based on the landmark doctrine enunciated in
Tijam v. Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather than
the rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in
cases in which the factual milieu is analogous to that in the cited case. In such
controversies, laches should have been clearly present; that is, lack of jurisdiction must have
been raised so belatedly as to warrant the presumption that the party entitled to assert it had
abandoned or declined to assert it.

In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion to
dismiss filed by the Surety almost 15 years after the questioned ruling had been rendered. At
several stages of the proceedings, in the court a quo as well as in the Court of Appeals, the
Surety invoked the jurisdiction of the said courts to obtain affirmative relief and submitted its
case for final adjudication on the merits. It was only when the adverse decision was rendered
by the Court of Appeals that it finally woke up to raise the question of jurisdiction.

Clearly, the factual settings attendant in Sibonghanoy are not present in the case at bar.
Petitioner Atty. Regalado, after the receipt of the Court of Appeals resolution finding her
guilty of contempt, promptly filed a Motion for Reconsideration assailing the said court’s
jurisdiction based on procedural infirmity in initiating the action. Her compliance with the
appellate court’s directive to show cause why she should not be cited for contempt and filing
a single piece of pleading to that effect could not be considered as an active participation in
the judicial proceedings so as to take the case within the milieu of Sibonghanoy. Rather, it is
the natural fear to disobey the mandate of the court that could lead to dire consequences
that impelled her to comply.34
The Court, thus, wavered on when to apply the exceptional circumstance in Sibonghanoy
and on when to apply the general rule enunciated as early as in De La Santa and expounded
at length in Calimlim. The general rule should, however, be, as it has always been, that the
issue of jurisdiction may be raised at any stage of the proceedings, even on appeal, and is
not lost by waiver or by estoppel. Estoppel by laches, to bar a litigant from asserting the
court’s absence or lack of jurisdiction, only supervenes in exceptional cases similar to the
factual milieu of Tijam v. Sibonghanoy. Indeed, the fact that a person attempts to invoke
unauthorized jurisdiction of a court does not estop him from thereafter challenging its
jurisdiction over the subject matter, since such jurisdiction must arise by law and not by mere
consent of the parties. This is especially true where the person seeking to invoke
unauthorized jurisdiction of the court does not thereby secure any advantage or the adverse
party does not suffer any harm.35

Applying the said doctrine to the instant case, the petitioner is in no way estopped by laches
in assailing the jurisdiction of the RTC, considering that he raised the lack thereof in his
appeal before the appellate court. At that time, no considerable period had yet elapsed for
laches to attach. True, delay alone, though unreasonable, will not sustain the defense of
"estoppel by laches" unless it further appears that the party, knowing his rights, has not
sought to enforce them until the condition of the party pleading laches has in good faith
become so changed that he cannot be restored to his former state, if the rights be then
enforced, due to loss of evidence, change of title, intervention of equities, and other
causes.36 In applying the principle of estoppel by laches in the exceptional case of
Sibonghanoy, the Court therein considered the patent and revolting inequity and unfairness
of having the judgment creditors go up their Calvary once more after more or less 15
years.37 The same, however, does not obtain in the instant case.

We note at this point that estoppel, being in the nature of a forfeiture, is not favored by law. It
is to be applied rarely—only from necessity, and only in extraordinary circumstances. The
doctrine must be applied with great care and the equity must be strong in its favor.38 When
misapplied, the doctrine of estoppel may be a most effective weapon for the accomplishment
of injustice.39 Moreover, a judgment rendered without jurisdiction over the subject matter is
void.40 Hence, the Revised Rules of Court provides for remedies in attacking judgments
rendered by courts or tribunals that have no jurisdiction over the concerned cases. No laches
will even attach when the judgment is null and void for want of jurisdiction. 41 As we have
stated in Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz,42

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or


government agency, over the nature and subject matter of a petition or complaint is
determined by the material allegations therein and the character of the relief prayed for,
irrespective of whether the petitioner or complainant is entitled to any or all such reliefs.
Jurisdiction over the nature and subject matter of an action is conferred by the Constitution
and the law, and not by the consent or waiver of the parties where the court otherwise would
have no jurisdiction over the nature or subject matter of the action. Nor can it be acquired
through, or waived by, any act or omission of the parties. Moreover, estoppel does not apply
to confer jurisdiction to a tribunal that has none over the cause of action. x x x

Indeed, the jurisdiction of the court or tribunal is not affected by the defenses or theories set
up by the defendant or respondent in his answer or motion to dismiss. Jurisdiction should be
determined by considering not only the status or the relationship of the parties but also the
nature of the issues or questions that is the subject of the controversy. x x x x The
proceedings before a court or tribunal without jurisdiction, including its decision, are null and
void, hence, susceptible to direct and collateral attacks.43
With the above considerations, we find it unnecessary to resolve the other issues raised in
the petition.

WHEREFORE, premises considered, the petition for review on certiorari is GRANTED.


Criminal Case No. 2235-M-94 is hereby DISMISSED without prejudice.

SO ORDERED.
G.R. No. 162059 January 22, 2008

HANNAH EUNICE D. SERANA, petitioner,


vs.
SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents.

DECISION

REYES, R.T., J.:

CAN the Sandiganbayan try a government scholaran** accused, along with her brother, of
swindling government funds?

MAAARI bang litisin ng Sandiganbayan ang isang iskolar ng bayan, at ang kanyang
kapatid, na kapwa pinararatangan ng estafa ng pera ng bayan?

The jurisdictional question is posed in this petition for certiorari assailing the Resolutions1 of
the Sandiganbayan, Fifth Division, denying petitioner’s motion to quash the information and
her motion for reconsideration.

The Antecedents

Petitioner Hannah Eunice D. Serana was a senior student of the University of the
Philippines-Cebu. A student of a state university is known as a government scholar. She was
appointed by then President Joseph Estrada on December 21, 1999 as a student regent of
UP, to serve a one-year term starting January 1, 2000 and ending on December 31, 2000.

In the early part of 2000, petitioner discussed with President Estrada the renovation of
Vinzons Hall Annex in UP Diliman.2 On September 4, 2000, petitioner, with her siblings and
relatives, registered with the Securities and Exchange Commission the Office of the Student
Regent Foundation, Inc. (OSRFI).3

One of the projects of the OSRFI was the renovation of the Vinzons Hall Annex.4 President
Estrada gave Fifteen Million Pesos (P15,000,000.00) to the OSRFI as financial assistance
for the proposed renovation. The source of the funds, according to the information, was the
Office of the President.

The renovation of Vinzons Hall Annex failed to materialize.5 The succeeding student regent,
Kristine Clare Bugayong, and Christine Jill De Guzman, Secretary General of the KASAMA
sa U.P., a system-wide alliance of student councils within the state university, consequently
filed a complaint for Malversation of Public Funds and Property with the Office of the
Ombudsman.6

On July 3, 2003, the Ombudsman, after due investigation, found probable cause to indict
petitioner and her brother Jade Ian D. Serana for estafa, docketed as Criminal Case No.
27819 of the Sandiganbayan.7 The Information reads:

The undersigned Special Prosecution Officer III, Office of the Special Prosecutor,
hereby accuses HANNAH EUNICE D. SERANA and JADE IAN D. SERANA of the
crime of Estafa, defined and penalized under Paragraph 2(a), Article 315 of the
Revised Penal Code, as amended committed as follows:
That on October, 24, 2000, or sometime prior or subsequent thereto, in Quezon City,
Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, above-
named accused, HANNAH EUNICE D. SERANA, a high-ranking public officer, being
then the Student Regent of the University of the Philippines, Diliman, Quezon City,
while in the performance of her official functions, committing the offense in relation to
her office and taking advantage of her position, with intent to gain, conspiring with
her brother, JADE IAN D. SERANA, a private individual, did then and there wilfully,
unlawfully and feloniously defraud the government by falsely and fraudulently
representing to former President Joseph Ejercito Estrada that the renovation of the
Vinzons Hall of the University of the Philippines will be renovated and renamed as
"President Joseph Ejercito Estrada Student Hall," and for which purpose accused
HANNAH EUNICE D. SERANA requested the amount of FIFTEEN MILLION PESOS
(P15,000,000.00), Philippine Currency, from the Office of the President, and the
latter relying and believing on said false pretenses and misrepresentation gave and
delivered to said accused Land Bank Check No. 91353 dated October 24, 2000 in
the amount of FIFTEEN MILLION PESOS (P15,000,000.00), which check was
subsequently encashed by accused Jade Ian D. Serana on October 25, 2000 and
misappropriated for their personal use and benefit, and despite repeated demands
made upon the accused for them to return aforesaid amount, the said accused failed
and refused to do so to the damage and prejudice of the government in the aforesaid
amount.

CONTRARY TO LAW. (Underscoring supplied)

Petitioner moved to quash the information. She claimed that the Sandiganbayan does not
have any jurisdiction over the offense charged or over her person, in her capacity as UP
student regent.

Petitioner claimed that Republic Act (R.A.) No. 3019, as amended by R.A. No. 8249,
enumerates the crimes or offenses over which the Sandiganbayan has jurisdiction.8 It has no
jurisdiction over the crime of estafa.9 It only has jurisdiction over crimes covered by Title VII,
Chapter II, Section 2 (Crimes Committed by Public Officers), Book II of the Revised Penal
Code (RPC). Estafa falling under Title X, Chapter VI (Crimes Against Property), Book II of
the RPC is not within the Sandiganbayan’s jurisdiction.

She also argued that it was President Estrada, not the government, that was duped. Even
assuming that she received the P15,000,000.00, that amount came from Estrada, not from
the coffers of the government.10

Petitioner likewise posited that the Sandiganbayan had no jurisdiction over her person. As a
student regent, she was not a public officer since she merely represented her peers, in
contrast to the other regents who held their positions in an ex officio capacity. She addsed
that she was a simple student and did not receive any salary as a student regent.

She further contended that she had no power or authority to receive monies or funds. Such
power was vested with the Board of Regents (BOR) as a whole. Since it was not alleged in
the information that it was among her functions or duties to receive funds, or that the crime
was committed in connection with her official functions, the same is beyond the jurisdiction of
the Sandiganbayan citing the case of Soller v. Sandiganbayan.11

The Ombudsman opposed the motion.12 It disputed petitioner’s interpretation of the law.
Section 4(b) of Presidential Decree (P.D.) No. 1606 clearly contains the catch -all phrase "in
relation to office," thus, the Sandiganbayan has jurisdiction over the charges against
petitioner. In the same breath, the prosecution countered that the source of the money is a
matter of defense. It should be threshed out during a full-blown trial.13

According to the Ombudsman, petitioner, despite her protestations, iwas a public officer. As
a member of the BOR, she hads the general powers of administration and exerciseds the
corporate powers of UP. Based on Mechem’s definition of a public office, petitioner’s stance
that she was not compensated, hence, not a public officer, is erroneous. Compensation is
not an essential part of public office. Parenthetically, compensation has been interpreted to
include allowances. By this definition, petitioner was compensated.14

Sandiganbayan Disposition

In a Resolution dated November 14, 2003, the Sandiganbayan denied petitioner’s motion for
lack of merit.15 It ratiocinated:

The focal point in controversy is the jurisdiction of the Sandiganbayan over this case.

It is extremely erroneous to hold that only criminal offenses covered by Chapter II,
Section 2, Title VII, Book II of the Revised Penal Code are within the jurisdiction of
this Court. As correctly pointed out by the prosecution, Section 4(b) of R.A. 8249
provides that the Sandiganbayan also has jurisdiction over other offenses committed
by public officials and employees in relation to their office. From this provision, there
is no single doubt that this Court has jurisdiction over the offense of estafa committed
by a public official in relation to his office.

Accused-movant’s claim that being merely a member in representation of the student


body, she was never a public officer since she never received any compensation nor
does she fall under Salary Grade 27, is of no moment, in view of the express
provision of Section 4 of Republic Act No. 8249 which provides:

Sec. 4. Jurisdiction – The Sandiganbayan shall exercise exclusive original jurisdiction


in all cases involving:

(A) x x x

(1) Officials of the executive branch occupying the positions of regional director and
higher, otherwise classified as Grade "27" and higher, of the Compensation and
Position Classification Act of 1989 (Republic Act No. 6758), specifically including:

xxxx

(g) Presidents, directors or trustees, or managers of government-owned or controlled


corporations, state universities or educational institutions or foundations. (Italics
supplied)

It is very clear from the aforequoted provision that the Sandiganbayan has original
exclusive jurisdiction over all offenses involving the officials enumerated in
subsection (g), irrespective of their salary grades, because the primordial
consideration in the inclusion of these officials is the nature of their responsibilities
and functions.
Is accused-movant included in the contemplated provision of law?

A meticulous review of the existing Charter of the University of the Philippines


reveals that the Board of Regents, to which accused-movant belongs, exclusively
exercises the general powers of administration and corporate powers in the
university, such as: 1) To receive and appropriate to the ends specified by law such
sums as may be provided by law for the support of the university; 2) To prescribe
rules for its own government and to enact for the government of the university such
general ordinances and regulations, not contrary to law, as are consistent with the
purposes of the university; and 3) To appoint, on recommendation of the President of
the University, professors, instructors, lecturers and other employees of the
University; to fix their compensation, hours of service, and such other duties and
conditions as it may deem proper; to grant to them in its discretion leave of absence
under such regulations as it may promulgate, any other provisions of law to the
contrary notwithstanding, and to remove them for cause after an investigation and
hearing shall have been had.

It is well-established in corporation law that the corporation can act only through its
board of directors, or board of trustees in the case of non-stock corporations. The
board of directors or trustees, therefore, is the governing body of the corporation.

It is unmistakably evident that the Board of Regents of the University of the


Philippines is performing functions similar to those of the Board of Trustees of a non-
stock corporation. This draws to fore the conclusion that being a member of such
board, accused-movant undoubtedly falls within the category of public officials upon
whom this Court is vested with original exclusive jurisdiction, regardless of the fact
that she does not occupy a position classified as Salary Grade 27 or higher under the
Compensation and Position Classification Act of 1989.

Finally, this court finds that accused-movant’s contention that the same of P15 Million
was received from former President Estrada and not from the coffers of the
government, is a matter a defense that should be properly ventilated during the trial
on the merits of this case.16

On November 19, 2003, petitioner filed a motion for reconsideration.17 The motion was
denied with finality in a Resolution dated February 4, 2004.18

Issue

Petitioner is now before this Court, contending that "THE RESPONDENT COURT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR EXCESS
OF JURISDICTION IN NOT QUASHING THE INFORMATION AND DISMISING THE CASE
NOTWITHSTANDING THAT IS HAS NO JURISDICTION OVER THE OFFENSE CHARGED
IN THE INFORMATION."19

In her discussion, she reiterates her four-fold argument below, namely: (a) the
Sandiganbayan has no jurisdiction over estafa; (b) petitioner is not a public officer with
Salary Grade 27 and she paid her tuition fees; (c) the offense charged was not committed in
relation to her office; (d) the funds in question personally came from President Estrada, not
from the government.

Our Ruling
The petition cannot be granted.

Preliminarily, the denial of a motion to


quash is not correctible by certiorari.

We would ordinarily dismiss this petition for certiorari outright on procedural grounds. Well-
established is the rule that when a motion to quash in a criminal case is denied, the remedy
is not a petition for certiorari, but for petitioners to go to trial, without prejudice to reiterating
the special defenses invoked in their motion to quash.20 Remedial measures as regards
interlocutory orders, such as a motion to quash, are frowned upon and often
dismissed.21 The evident reason for this rule is to avoid multiplicity of appeals in a single
action.22

In Newsweek, Inc. v. Intermediate Appellate Court,23 the Court clearly explained and
illustrated the rule and the exceptions, thus:

As a general rule, an order denying a motion to dismiss is merely interlocutory and


cannot be subject of appeal until final judgment or order is rendered. (Sec. 2 of Rule
41). The ordinary procedure to be followed in such a case is to file an answer, go to
trial and if the decision is adverse, reiterate the issue on appeal from the final
judgment. The same rule applies to an order denying a motion to quash, except that
instead of filing an answer a plea is entered and no appeal lies from a judgment of
acquittal.

This general rule is subject to certain exceptions. If the court, in denying the motion
to dismiss or motion to quash, acts without or in excess of jurisdiction or with grave
abuse of discretion, then certiorari or prohibition lies. The reason is that it would be
unfair to require the defendant or accused to undergo the ordeal and expense of a
trial if the court has no jurisdiction over the subject matter or offense, or is not the
court of proper venue, or if the denial of the motion to dismiss or motion to quash is
made with grave abuse of discretion or a whimsical and capricious exercise of
judgment. In such cases, the ordinary remedy of appeal cannot be plain and
adequate. The following are a few examples of the exceptions to the general rule.

In De Jesus v. Garcia (19 SCRA 554), upon the denial of a motion to dismiss based
on lack of jurisdiction over the subject matter, this Court granted the petition
for certiorari and prohibition against the City Court of Manila and directed the
respondent court to dismiss the case.

In Lopez v. City Judge (18 SCRA 616), upon the denial of a motion to quash based
on lack of jurisdiction over the offense, this Court granted the petition for prohibition
and enjoined the respondent court from further proceeding in the case.

In Enriquez v. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss based
on improper venue, this Court granted the petition for prohibition and enjoined the
respondent judge from taking cognizance of the case except to dismiss the same.

In Manalo v. Mariano (69 SCRA 80), upon the denial of a motion to dismiss based on
bar by prior judgment, this Court granted the petition for certiorari and directed the
respondent judge to dismiss the case.
In Yuviengco v. Dacuycuy (105 SCRA 668), upon the denial of a motion to dismiss
based on the Statute of Frauds, this Court granted the petition for certiorari and
dismissed the amended complaint.

In Tacas v. Cariaso (72 SCRA 527), this Court granted the petition for certiorari after
the motion to quash based on double jeopardy was denied by respondent judge and
ordered him to desist from further action in the criminal case except to dismiss the
same.

In People v. Ramos (83 SCRA 11), the order denying the motion to quash based on
prescription was set aside on certiorari and the criminal case was dismissed by this
Court.24

We do not find the Sandiganbayan to have committed a grave abuse of discretion.

The jurisdiction of the Sandiganbayan is


set by P.D. No. 1606, as amended, not by
R.A. No. 3019, as amended.

We first address petitioner’s contention that the jurisdiction of the Sandiganbayan is


determined by Section 4 of R.A. No. 3019 (The Anti-Graft and Corrupt Practices Act, as
amended). We note that petitioner refers to Section 4 of the said law yet quotes Section 4 of
P.D. No. 1606, as amended, in her motion to quash before the Sandiganbayan.25She repeats
the reference in the instant petition for certiorari26 and in her memorandum of authorities.27

We cannot bring ourselves to write this off as a mere clerical or typographical error. It bears
stressing that petitioner repeated this claim twice despite corrections made by the
Sandiganbayan.28

Her claim has no basis in law. It is P.D. No. 1606, as amended, rather than R.A. No. 3019,
as amended, that determines the jurisdiction of the Sandiganbayan. A brief legislative history
of the statute creating the Sandiganbayan is in order. The Sandiganbayan was created
by P.D. No. 1486, promulgated by then President Ferdinand E. Marcos on June 11, 1978. It
was promulgated to attain the highest norms of official conduct required of public officers and
employees, based on the concept that public officers and employees shall serve with the
highest degree of responsibility, integrity, loyalty and efficiency and shall remain at all times
accountable to the people.29

P.D. No. 1486 was, in turn, amended by P.D. No. 1606 which was promulgated on
December 10, 1978. P.D. No. 1606 expanded the jurisdiction of the Sandiganbayan.30

P.D. No. 1606 was later amended by P.D. No. 1861 on March 23, 1983, further altering the
Sandiganbayan jurisdiction. R.A. No. 7975 approved on March 30, 1995 made succeeding
amendments to P.D. No. 1606, which was again amended on February 5, 1997 by R.A. No.
8249. Section 4 of R.A. No. 8249 further modified the jurisdiction of the Sandiganbayan. As it
now stands, the Sandiganbayan has jurisdiction over the following:

Sec. 4. Jurisdiction. - The Sandiganbayan shall exercise exclusive original


jurisdiction in all cases involving:
A. Violations of Republic Act No. 3019, as amended, other known as the Anti-Graft
and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title
VII, Book II of the Revised Penal Code, where one or more of the accused are
officials occupying the following positions in the government, whether in a
permanent, acting or interim capacity, at the time of the commission of the offense:

(1) Officials of the executive branch occupying the positions of regional director and
higher, otherwise classified as Grade "27" and higher, of the Compensation and
Position Classification Act of 989 (Republic Act No. 6758), specifically including:

" (a) Provincial governors, vice-governors, members of the sangguniang


panlalawigan, and provincial treasurers, assessors, engineers, and other city
department heads;

" (b) City mayor, vice-mayors, members of the sangguniang panlungsod, city
treasurers, assessors, engineers, and other city department heads;

"(c ) Officials of the diplomatic service occupying the position of consul and higher;

" (d) Philippine army and air force colonels, naval captains, and all officers of higher
rank;

" (e) Officers of the Philippine National Police while occupying the position of
provincial director and those holding the rank of senior superintended or higher;

" (f) City and provincial prosecutors and their assistants, and officials and prosecutors
in the Office of the Ombudsman and special prosecutor;

" (g) Presidents, directors or trustees, or managers of government-owned or


controlled corporations, state universities or educational institutions or foundations.

" (2) Members of Congress and officials thereof classified as Grade "27'" and up
under the Compensation and Position Classification Act of 1989;

" (3) Members of the judiciary without prejudice to the provisions of the Constitution;

" (4) Chairmen and members of Constitutional Commission, without prejudice to the
provisions of the Constitution; and

" (5) All other national and local officials classified as Grade "27'" and higher under
the Compensation and Position Classification Act of 1989.

B. Other offenses of felonies whether simple or complexed with other crimes


committed by the public officials and employees mentioned in subsection a of this
section in relation to their office.

C. Civil and criminal cases filed pursuant to and in connection with Executive Order
Nos. 1, 2, 14 and 14-A, issued in 1986.

" In cases where none of the accused are occupying positions corresponding to
Salary Grade "27'" or higher, as prescribed in the said Republic Act No. 6758, or
military and PNP officer mentioned above, exclusive original jurisdiction thereof shall
be vested in the proper regional court, metropolitan trial court, municipal trial court,
and municipal circuit trial court, as the case may be, pursuant to their respective
jurisdictions as provided in Batas Pambansa Blg. 129, as amended.

" The Sandiganbayan shall exercise exclusive appellate jurisdiction over final
judgments, resolutions or order of regional trial courts whether in the exercise of their
own original jurisdiction or of their appellate jurisdiction as herein provided.

" The Sandiganbayan shall have exclusive original jurisdiction over petitions for the
issuance of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions,
and other ancillary writs and processes in aid of its appellate jurisdiction and over
petitions of similar nature, including quo warranto, arising or that may arise in cases
filed or which may be filed under Executive Order Nos. 1, 2, 14 and 14-A, issued in
1986: Provided, That the jurisdiction over these petitions shall not be exclusive of the
Supreme Court.

" The procedure prescribed in Batas Pambansa Blg. 129, as well as the
implementing rules that the Supreme Court has promulgated and may thereafter
promulgate, relative to appeals/petitions for review to the Court of Appeals, shall
apply to appeals and petitions for review filed with the Sandiganbayan. In all cases
elevated to the Sandiganbayan and from the Sandiganbayan to the Supreme Court,
the Office of the Ombudsman, through its special prosecutor, shall represent the
People of the Philippines, except in cases filed pursuant to Executive Order Nos. 1,
2, 14 and 14-A, issued in 1986.

" In case private individuals are charged as co-principals, accomplices or accessories


with the public officers or employees, including those employed in government-
owned or controlled corporations, they shall be tried jointly with said public officers
and employees in the proper courts which shall exercise exclusive jurisdiction over
them.

" Any provisions of law or Rules of Court to the contrary notwithstanding, the criminal
action and the corresponding civil action for the recovery of civil liability shall, at all
times, be simultaneously instituted with, and jointly determined in, the same
proceeding by the Sandiganbayan or the appropriate courts, the filing of the criminal
action being deemed to necessarily carry with it the filing of the civil action, and no
right to reserve the filing such civil action separately from the criminal action shall be
recognized: Provided, however, That where the civil action had heretofore been filed
separately but judgment therein has not yet been rendered, and the criminal case is
hereafter filed with the Sandiganbayan or the appropriate court, said civil action shall
be transferred to the Sandiganbayan or the appropriate court, as the case may be,
for consolidation and joint determination with the criminal action, otherwise the
separate civil action shall be deemed abandoned."

Upon the other hand, R.A. No. 3019 is a penal statute approved on August 17, 1960. The
said law represses certain acts of public officers and private persons alike which constitute
graft or corrupt practices or which may lead thereto.31 Pursuant to Section 10 of R.A. No.
3019, all prosecutions for violation of the said law should be filed with the Sandiganbayan.32

R.A. No. 3019 does not contain an enumeration of the cases over which the Sandiganbayan
has jurisdiction. In fact, Section 4 of R.A. No. 3019 erroneously cited by petitioner, deals not
with the jurisdiction of the Sandiganbayan but with prohibition on private individuals. We
quote:

Section 4. Prohibition on private individuals. – (a) It shall be unlawful for any person
having family or close personal relation with any public official to capitalize or exploit
or take advantage of such family or close personal relation by directly or indirectly
requesting or receiving any present, gift or material or pecuniary advantage from any
other person having some business, transaction, application, request or contract with
the government, in which such public official has to intervene. Family relation shall
include the spouse or relatives by consanguinity or affinity in the third civil degree.
The word "close personal relation" shall include close personal friendship, social and
fraternal connections, and professional employment all giving rise to intimacy which
assures free access to such public officer.

(b) It shall be unlawful for any person knowingly to induce or cause any public official
to commit any of the offenses defined in Section 3 hereof.

In fine, the two statutes differ in that P.D. No. 1606, as amended, defines the jurisdiction of
the Sandiganbayan while R.A. No. 3019, as amended, defines graft and corrupt practices
and provides for their penalties.

Sandiganbayan has jurisdiction over


the offense of estafa.

Relying on Section 4 of P.D. No. 1606, petitioner contends that estafa is not among those
crimes cognizable by the Sandiganbayan. We note that in hoisting this argument, petitioner
isolated the first paragraph of Section 4 of P.D. No. 1606, without regard to the succeeding
paragraphs of the said provision.

The rule is well-established in this jurisdiction that statutes should receive a sensible
construction so as to avoid an unjust or an absurd conclusion.33 Interpretatio talis in ambiguis
semper fienda est, ut evitetur inconveniens et absurdum. Where there is ambiguity, such
interpretation as will avoid inconvenience and absurdity is to be adopted. Kung saan
mayroong kalabuan, ang pagpapaliwanag ay hindi dapat maging mahirap at katawa-
tawa.

Every section, provision or clause of the statute must be expounded by reference to each
other in order to arrive at the effect contemplated by the legislature.34 The intention of the
legislator must be ascertained from the whole text of the law and every part of the act is to be
taken into view.35 In other words, petitioner’s interpretation lies in direct opposition to the rule
that a statute must be interpreted as a whole under the principle that the best interpreter of a
statute is the statute itself.36 Optima statuti interpretatrix est ipsum statutum. Ang isang
batas ay marapat na bigyan ng kahulugan sa kanyang kabuuan sa ilalim ng prinsipyo
na ang pinakamainam na interpretasyon ay ang mismong batas.

Section 4(B) of P.D. No. 1606 reads:

B. Other offenses or felonies whether simple or complexed with other crimes


committed by the public officials and employees mentioned in subsection a of this
section in relation to their office.
Evidently, the Sandiganbayan has jurisdiction over other felonies committed by public
officials in relation to their office. We see no plausible or sensible reason to exclude estafa as
one of the offenses included in Section 4(bB) of P.D. No. 1606. Plainly, estafa is one of those
other felonies. The jurisdiction is simply subject to the twin requirements that (a) the offense
is committed by public officials and employees mentioned in Section 4(A) of P.D. No. 1606,
as amended, and that (b) the offense is committed in relation to their office.

In Perlas, Jr. v. People,37 the Court had occasion to explain that the Sandiganbayan has
jurisdiction over an indictment for estafa versus a director of the National Parks Development
Committee, a government instrumentality. The Court held then:

The National Parks Development Committee was created originally as an Executive


Committee on January 14, 1963, for the development of the Quezon Memorial,
Luneta and other national parks (Executive Order No. 30). It was later designated as
the National Parks Development Committee (NPDC) on February 7, 1974 (E.O. No.
69). On January 9, 1966, Mrs. Imelda R. Marcos and Teodoro F. Valencia were
designated Chairman and Vice-Chairman respectively (E.O. No. 3). Despite an
attempt to transfer it to the Bureau of Forest Development, Department of Natural
Resources, on December 1, 1975 (Letter of Implementation No. 39, issued pursuant
to PD No. 830, dated November 27, 1975), the NPDC has remained under the Office
of the President (E.O. No. 709, dated July 27, 1981).

Since 1977 to 1981, the annual appropriations decrees listed NPDC as a regular
government agency under the Office of the President and allotments for its
maintenance and operating expenses were issued direct to NPDC (Exh. 10-A,
Perlas, Item Nos. 2, 3).

The Sandiganbayan’s jurisdiction over estafa was reiterated with greater firmness in Bondoc
v. Sandiganbayan.38Pertinent parts of the Court’s ruling in Bondoc read:

Furthermore, it is not legally possible to transfer Bondoc’s cases to the Regional Trial
Court, for the simple reason that the latter would not have jurisdiction over the
offenses. As already above intimated, the inability of the Sandiganbayan to hold a
joint trial of Bondoc’s cases and those of the government employees separately
charged for the same crimes, has not altered the nature of the offenses charged,
as estafa thru falsification punishable by penalties higher than prision correccional or
imprisonment of six years, or a fine of P6,000.00, committed by government
employees in conspiracy with private persons, including Bondoc. These crimes are
within the exclusive, original jurisdiction of the Sandiganbayan. They simply cannot
be taken cognizance of by the regular courts, apart from the fact that even if the
cases could be so transferred, a joint trial would nonetheless not be possible.

Petitioner UP student regent


is a public officer.

Petitioner also contends that she is not a public officer. She does not receive any salary or
remuneration as a UP student regent. This is not the first or likely the last time that We will
be called upon to define a public officer. In Khan, Jr. v. Office of the Ombudsman, We ruled
that it is difficult to pin down the definition of a public officer.39 The 1987 Constitution does not
define who are public officers. Rather, the varied definitions and concepts are found in
different statutes and jurisprudence.
In Aparri v. Court of Appeals,40 the Court held that:

A public office is the right, authority, and duty created and conferred by law, by which
for a given period, either fixed by law or enduring at the pleasure of the creating
power, an individual is invested with some portion of the sovereign functions of the
government, to be exercise by him for the benefit of the public ([Mechem Public
Offices and Officers,] Sec. 1). The right to hold a public office under our political
system is therefore not a natural right. It exists, when it exists at all only because and
by virtue of some law expressly or impliedly creating and conferring it (Mechem Ibid.,
Sec. 64). There is no such thing as a vested interest or an estate in an office, or even
an absolute right to hold office. Excepting constitutional offices which provide for
special immunity as regards salary and tenure, no one can be said to have any
vested right in an office or its salary (42 Am. Jur. 881).

In Laurel v. Desierto,41 the Court adopted the definition of Mechem of a public office:

"A public office is the right, authority and duty, created and conferred by law, by
which, for a given period, either fixed by law or enduring at the pleasure of the
creating power, an individual is invested with some portion of the sovereign functions
of the government, to be exercised by him for the benefit of the public. The individual
so invested is a public officer."42

Petitioner claims that she is not a public officer with Salary Grade 27; she is, in fact, a regular
tuition fee-paying student. This is likewise bereft of merit. It is not only the salary grade that
determines the jurisdiction of the Sandiganbayan. The Sandiganbayan also has jurisdiction
over other officers enumerated in P.D. No. 1606. In Geduspan v. People,43 We held that
while the first part of Section 4(A) covers only officials with Salary Grade 27 and higher, its
second part specifically includes other executive officials whose positions may not be of
Salary Grade 27 and higher but who are by express provision of law placed under the
jurisdiction of the said court. Petitioner falls under the jurisdiction of the Sandiganbayan as
she is placed there by express provision of law.44

Section 4(A)(1)(g) of P.D. No. 1606 explictly vested the Sandiganbayan with jurisdiction over
Presidents, directors or trustees, or managers of government-owned or controlled
corporations, state universities or educational institutions or foundations. Petitioner falls
under this category. As the Sandiganbayan pointed out, the BOR performs functions similar
to those of a board of trustees of a non-stock corporation.45 By express mandate of law,
petitioner is, indeed, a public officer as contemplated by P.D. No. 1606.

Moreover, it is well established that compensation is not an essential element of public


office.46 At most, it is merely incidental to the public office.47

Delegation of sovereign functions is essential in the public office. An investment in an


individual of some portion of the sovereign functions of the government, to be exercised by
him for the benefit of the public makes one a public officer.48

The administration of the UP is a sovereign function in line with Article XIV of the
Constitution. UP performs a legitimate governmental function by providing advanced
instruction in literature, philosophy, the sciences, and arts, and giving professional and
technical training.49 Moreover, UP is maintained by the Government and it declares no
dividends and is not a corporation created for profit.50
The offense charged was committed
in relation to public office, according
to the Information.

Petitioner likewise argues that even assuming that she is a public officer, the Sandiganbayan
would still not have jurisdiction over the offense because it was not committed in relation to
her office.

According to petitioner, she had no power or authority to act without the approval of the
BOR. She adds there was no Board Resolution issued by the BOR authorizing her to
contract with then President Estrada; and that her acts were not ratified by the governing
body of the state university. Resultantly, her act was done in a private capacity and not in
relation to public office.

It is axiomatic that jurisdiction is determined by the averments in the information.51 More than
that, jurisdiction is not affected by the pleas or the theories set up by defendant or
respondent in an answer, a motion to dismiss, or a motion to quash.52 Otherwise, jurisdiction
would become dependent almost entirely upon the whims of defendant or respondent.53

In the case at bench, the information alleged, in no uncertain terms that petitioner, being then
a student regent of U.P., "while in the performance of her official functions, committing the
offense in relation to her office and taking advantage of her position, with intent to gain,
conspiring with her brother, JADE IAN D. SERANA, a private individual, did then and there
wilfully, unlawfully and feloniously defraud the government x x x." (Underscoring supplied)

Clearly, there was no grave abuse of discretion on the part of the Sandiganbayan when it did
not quash the information based on this ground.

Source of funds is a defense that should


be raised during trial on the merits.

It is contended anew that the amount came from President Estrada’s private funds and not
from the government coffers. Petitioner insists the charge has no leg to stand on.

We cannot agree. The information alleges that the funds came from the Office of the
President and not its then occupant, President Joseph Ejercito Estrada. Under the
information, it is averred that "petitioner requested the amount of Fifteen Million Pesos
(P15,000,000.00), Philippine Currency, from the Office of the President, and the latter relying
and believing on said false pretenses and misrepresentation gave and delivered to said
accused Land Bank Check No. 91353 dated October 24, 2000 in the amount of Fifteen
Million Pesos (P15,000,000.00)."

Again, the Court sustains the Sandiganbayan observation that the source of the P15,000,000
is a matter of defense that should be ventilated during the trial on the merits of the instant
case.54

A lawyer owes candor, fairness


and honesty to the Court.

As a parting note, petitioner’s counsel, Renato G. dela Cruz, misrepresented his reference to
Section 4 of P.D. No. 1606 as a quotation from Section 4 of R.A. No. 3019. A review of his
motion to quash, the instant petition for certiorari and his memorandum, unveils the
misquotation. We urge petitioner’s counsel to observe Canon 10 of the Code of Professional
Responsibility, specifically Rule 10.02 of the Rules stating that "a lawyer shall not misquote
or misrepresent."

The Court stressed the importance of this rule in Pangan v. Ramos,55 where Atty Dionisio D.
Ramos used the name Pedro D.D. Ramos in connection with a criminal case. The Court
ruled that Atty. Ramos resorted to deception by using a name different from that with which
he was authorized. We severely reprimanded Atty. Ramos and warned that a repetition may
warrant suspension or disbarment.56

We admonish petitioner’s counsel to be more careful and accurate in his citation. A lawyer’s
conduct before the court should be characterized by candor and fairness.57 The
administration of justice would gravely suffer if lawyers do not act with complete candor and
honesty before the courts.58

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.
G.R. No. 198755 June 5, 2013

ALBERTO PAT-OG, SR., Petitioner,


vs.
CIVIL SERVICE COMMISSION, Respondent.

DECISION

MENDOZA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
which seeks to set aside the April 6, 2011 Decision1 of the Court of Appeals (CA) in CA-G.R.
SP No. 101700, affirming the April 11, 2007 Decision2 of the Civil Service Commission
(CSC), which ordered the dismissal of petitioner Alberto Pat-og, Sr. (Pat-og) from the service
for grave misconduct.

The Facts

On September 13, 2003, Robert Bang-on (Bang-on), then a 14-year old second year high
school student of the Antadao National High School in Sagada, Mountain Province, tiled an
affidavit-complaint against Pat-og, a third year high school teacher of the same school,
before the Civil Service Commission-Cordillera Administrative Region (CSC-CAR).

Bang-on alleged that on the morning of August 26, 2003, he attended his class at the
basketball court of the school, where Pat-og and his third year students were also holding a
separate class; that he and some of his classmates joined Pat-og’s third year students who
were practicing basketball shots; that Pat-og later instructed them to form two lines; that
thinking that three lines were to be formed, he stayed in between the two lines; that Pat-og
then held his right arm and punched his stomach without warning for failing to follow
instructions; and that as a result, he suffered stomach pain for several days and was
confined in a hospital from September 10-12, 2003, as evidenced by a medico-legal
certificate, which stated that he sustained a contusion hematoma in the hypogastric area.

Regarding the same incident, Bang-on filed a criminal case against Pat-og for the crime of
Less Serious Physical Injury with the Regional Trial Court (RTC) of Bontoc, Mountain
Province.

Taking cognizance of the administrative case, the CSC-CAR directed Pat-og to file his
counter-affidavit. He denied the charges hurled against him and claimed that when he was
conducting his Music, Arts, Physical Education and Health (MAPEH) class, composed of
third year students, he instructed the girls to play volleyball and the boys to play basketball;
that he later directed the boys to form two lines; that after the boys failed to follow his
repeated instructions, he scolded them in a loud voice and wrested the ball from them; that
while approaching them, he noticed that there were male students who were not members of
his class who had joined the shooting practice; that one of those male students was Bang-
on, who was supposed to be having his own MAPEH class under another teacher; that he
then glared at them, continued scolding them and dismissed the class for their failure to
follow instructions; and that he offered the sworn statement of other students to prove that he
did not box Bang-on.

On June 1, 2004, the CSC-CAR found the existence of a prima faciecase for misconduct and
formally charged Pat-og.
While the proceedings of the administrative case were ongoing, the RTC rendered its
judgment in the criminal case and found Pat-og guilty of the offense of slight physical injury.
He was meted the penalty of imprisonment from eleven (11) to twenty (20) days. Following
his application for probation, the decision became final and executory and judgment was
entered.

Meanwhile, in the administrative case, a pre-hearing conference was conducted after


repeated postponement by Pat-og. With the approval of the CSC-CAR, the prosecution
submitted its position paper in lieu of a formal presentation of evidence and formally offered
its evidence, which included the decision in the criminal case. It offered the affidavits of
Raymund Atuban, a classmate of Bang-on; and James Domanog, a third year high school
student, who both witnessed Pat-og hit Bang-on in the stomach.

For his defense, Pat-og offered the testimonies of his witnesses - Emiliano Dontongan
(Dontongan), a teacher in another school, who alleged that he was a member of the
Municipal Council for the Protection of Children, and that, in such capacity, he investigated
the incident and came to the conclusion that it did not happen at all; and Ernest Kimmot, who
testified that he was in the basketball court at the time but did not see such incident. Pat-og
also presented the affidavits of thirteen other witnesses to prove that he did not punch Bang-
on.

Ruling of the CSC-CAR

In its Decision,3 dated September 19, 2006, the CSC-CAR found Pat-og guilty and disposed
as follows:

WHEREFORE, all premises told, respondent Alberto Pat-og, Sr., Teacher Antadao National
High School, is hereby found guilty of Simple Misconduct.

Under the Uniform Rules on Administrative Cases in the Civil Service, the imposable penalty
on the first offense of Simple Misconduct is suspension of one (1) month and one (1) day to
six (6) months.

Due to seriousness of the resulting injury to the fragile body of the minor victim, the CSC-
CAR hereby imposed upon respondent the maximum penalty attached to the offense which
is six months suspension without pay.

The CSC-CAR gave greater weight to the version posited by the prosecution, finding that a
blow was indeed inflicted by Pat-og on Bang-on. It found that Pat-og had a motive for doing
so - his students’ failure to follow his repeated instructions which angered him. Nevertheless,
the CSCCAR ruled that a motive was not necessary to establish guilt if the perpetrator of the
offense was positively identified. The positive identification of Pat-og was duly proven by the
corroborative testimonies of the prosecution witnesses, who were found to be credible and
disinterested. The testimony of defense witness, Dontongan, was not given credence
considering that the students he interviewed for his investigation claimed that Pat-og was not
even angry at the time of the incident, contrary to the latter’s own admission.

The CSC-CAR held that the actions of Pat-og clearly transgressed the proper norms of
conduct required of a public official, and the gravity of the offense was further magnified by
the seriousness of the injury of Bang-on which required a healing period of more than ten
(10) days. It pointed out that, being his teacher, Pat-og’s substitute parental authority did not
give him license to physically chastise a misbehaving student. The CSC-CAR added that the
fact that Pat-og applied for probation in the criminal case, instead of filing an appeal, further
convinced it of his guilt.

The CSC-CAR believed that the act committed by Pat-og was sufficient to find him guilty of
Grave Misconduct. It, however, found the corresponding penalty of dismissal from the
service too harsh under the circumstances. Thus, it adjudged petitioner guilty of Simple
Misconduct and imposed the maximum penalty of suspension for six (6) months.

On December 11, 2006, the motion for reconsideration filed by Pat-og was denied for lack of
merit.4

The Ruling of the CSC

In its Resolution,5 dated April 11, 2007, the CSC dismissed Pat-og’s appeal and affirmed with
modification the decision of the CSC-CAR as follows:

WHEREFORE, foregoing premises considered, the instant appeal is hereby DISMISSED.


The decision of the CSC-CAR is affirmed with the modification that Alberto Pat-og, Sr., is
adjudged guilty of grave misconduct, for which he is meted out the penalty of dismissal from
the service with all its accessory penalties of cancellation of eligibilities, perpetual
disqualification from reemployment in the government service, and forfeiture of retirement
benefits.6

After evaluating the records, the CSC sustained the CSC-CAR’s conclusion that there
existed substantial evidence to sustain the finding that Pat-og did punch Bang-on in the
stomach. It gave greater weight to the positive statements of Bang-on and his witnesses over
the bare denial of Patog. It also highlighted the fact that Pat-og failed to adduce evidence of
any ill motive on the part of Bang-on in filing the administrative case against him. It likewise
gave credence to the medico-legal certificate showing that Bang-on suffered a hematoma
contusion in his hypogastric area.

The CSC ruled that the affidavits of Bang-on’s witnesses were not bereft of evidentiary value
even if Pat-og was not afforded a chance to cross-examine the witnesses of Bang-on. It is of
no moment because the cross- examination of witnesses is not an indispensable
requirement of administrative due process.

The CSC noted that Pat-og did not question but, instead, fully acquiesced in his conviction in
the criminal case for slight physical injury, which was based on the same set of facts and
circumstances, and involved the same parties and issues. It, thus, considered his prior
criminal conviction as evidence against him in the administrative case.

Finding that his act of punching his student displayed a flagrant and wanton disregard of the
dignity of a person, reminiscent of corporal punishment that had since been outlawed for
being harsh, unjust, and cruel, the CSC upgraded Pat-og’s offense from Simple Misconduct
to Grave Misconduct and ordered his dismissal from the service.

Pat-og filed a motion for reconsideration, questioning for the first time the jurisdiction of CSC
over the case. He contended that administrative charges against a public school teacher
should have been initially heard by a committee to be constituted pursuant to the Magna
Carta for Public School Teachers.
On November 5, 2007, the CSC denied his motion for reconsideration.7 It ruled that Pat-og
was estopped from challenging its jurisdiction considering that he actively participated in the
administrative proceedings against him, raising the issue of jurisdiction only after his appeal
was dismissed by the CSC.

Ruling of the Court of Appeals

In its assailed April 6, 2011 Decision,8 the CA affirmed the resolutions of the CSC. It agreed
that Pat-og was estopped from questioning the jurisdiction of the CSC as the records clearly
showed that he actively participated in the proceedings. It was of the view that Pat-og was
not denied due process when he failed to cross-examine Bang-on and his witnesses
because he was given the opportunity to be heard and present his evidence before the CSC-
CAR and the CSC.

The CA also held that the CSC committed no error in taking into account the conviction of
Pat-og in the criminal case. It stated that his conviction was not the sole basis of the CSC for
his dismissal from the service because there was substantial evidence proving that Pat-og
had indeed hit Bang-on.

In its assailed Resolution,9 dated September 13, 2011, the CA denied the motion for
reconsideration filed by Pat-og.

Hence, the present petition with the following

Assignment of Errors

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE


OF DISCRETION WHEN IT AFFIRMED THE SUPREME PENALTY OF DISMISSAL FROM
SERVICE WITH FORFEITURE OF RETIREMENT BENEFITS AGAINST THE PETITIONER
WITHOUT CONSIDERING PETITIONER’S LONG YEARS OF GOVERNMENT SERVICE?

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE


OF DISCRETION WHEN IT RULED THAT PETITIONER IS ESTOPPED FROM
QUESTIONING THE JURISDICTION OF THE CIVIL SERVICE COMMISSION TO HEAR
AND DECIDE THE ADMINISTRATIVE CASE AGAINST HIM?

WHETHER OR NOT RESPONDENT COURT OF APPEALS SERIOUSLY ERRED AND


COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE APPEAL DESPITE
LACK OF SUBSTANTIAL EVIDENCE?

On Jurisdiction

Pat-og contends that Section 9 of Republic Act (R.A.) No. 4670, otherwise known as the
Magna Carta for Public School Teachers, provides that administrative charges against a
public school teacher shall be heard initially by a committee constituted under said section.
As no committee was ever formed, the petitioner posits that he was denied due process and
that the CSC did not have the jurisdiction to hear and decide his administrative case. He
further argues that notwithstanding the fact that the issue of jurisdiction was raised for the
first time on appeal, the rule remains that estoppel does not confer jurisdiction on a tribunal
that has no jurisdiction over the cause of action or subject matter of the case.
The Court cannot sustain his position.

The petitioner’s argument that the administrative case against him can only proceed under
R.A. No. 4670 is misplaced.

In Puse v. Santos-Puse,10 it was held that the CSC, the Department of Education (DepEd)
and the Board of Professional Teachers-Professional Regulatory Commission (PRC) have
concurrent jurisdiction over administrative cases against public school teachers.

Under Article IX-B of the 1987 Constitution, the CSC is the body charged with the
establishment and administration of a career civil service which embraces all branches and
agencies of the government.11 Executive Order (E.O.) No. 292 (the Administrative Code of
1987)12 and Presidential Decree (P.D.) No. 807 (the Civil Service Decree of the
Philippines)13 expressly provide that the CSC has the power to hear and decide
administrative disciplinary cases instituted with it or brought to it on appeal. Thus, the CSC,
as the central personnel agency of the government, has the inherent power to supervise and
discipline all members of the civil service, including public school teachers.

Indeed, under Section 9 of R.A. No. 4670, the jurisdiction over administrative cases of public
school teachers is lodged with the investigating committee constituted therein.14 Also, under
Section 23 of R.A. No. 7836 (the Philippine Teachers Professionalization Act of 1994), the
Board of Professional Teachers is given the power, after due notice and hearing, to suspend
or revoke the certificate of registration of a professional teacher for causes enumerated
therein.15

Concurrent jurisdiction is that which is possessed over the same parties or subject matter at
the same time by two or more separate tribunals. When the law bestows upon a government
body the jurisdiction to hear and decide cases involving specific matters, it is to be presumed
that such jurisdiction is exclusive unless it be proved that another body is likewise vested
with the same jurisdiction, in which case, both bodies have concurrent jurisdiction over the
matter.16

Where concurrent jurisdiction exists in several tribunals, the body that first takes cognizance
of the complaint shall exercise jurisdiction to the exclusion of the others. In this case, it was
CSC which first acquired jurisdiction over the case because the complaint was filed before it.
Thus, it had the authority to proceed and decide the case to the exclusion of the DepEd and
the Board of Professional Teachers.17

In CSC v. Alfonso,18 it was held that special laws, such as R.A. No. 4670, do not divest the
CSC of its inherent power to supervise and discipline all members of the civil service,
including public school teachers. Pat-og, as a public school teacher, is first and foremost, a
civil servant accountable to the people and answerable to the CSC for complaints lodged
against him as a public servant. To hold that R.A. No. 4670 divests the CSC of its power to
discipline public school teachers would negate the very purpose for which the CSC was
established and would impliedly amend the Constitution itself.

To further drive home the point, it was ruled in CSC v. Macud19 that R.A. No. 4670, in
imposing a separate set of procedural requirements in connection with administrative
proceedings against public school teachers, should be construed to refer only to the specific
procedure to be followed in administrative investigations conducted by the DepEd. By no
means, then, did R.A. No. 4670 confer an exclusive disciplinary authority over public school
teachers on the DepEd.
At any rate, granting that the CSC was without jurisdiction, the petitioner is indeed estopped
from raising the issue. Although the rule states that a jurisdictional question may be raised at
any time, such rule admits of the exception where, as in this case, estoppel has
supervened.20 Here, instead of opposing the CSC’s exercise of jurisdiction, the petitioner
invoked the same by actively participating in the proceedings before the CSC-CAR and by
even filing his appeal before the CSC itself; only raising the issue of jurisdiction later in his
motion for reconsideration after the CSC denied his appeal. This Court has time and again
frowned upon the undesirable practice of a party submitting his case for decision and then
accepting the judgment only if favorable, but attacking it for lack of jurisdiction when
adverse.21

On Administrative Due Process

On due process, Pat-og asserts that the affidavits of the complainant and his witnesses are
of questionable veracity having been subscribed in Bontoc, which is nearly 30 kilometers
from the residences of the parties. Furthermore, he claimed that considering that the said
affiants never testified, he was never afforded the opportunity to cross-examine them.
Therefore, their affidavits were mere hearsay and insufficient to prove his guilt.

The petitioner does not persuade.

The essence of due process is simply to be heard, or as applied to administrative


proceedings, a fair and reasonable opportunity to explain one’s side, or an opportunity to
seek a reconsideration of the action or ruling complained of.22 Administrative due process
cannot be fully equated with due process in its strict judicial sense. In administrative
proceedings, a formal or trial-type hearing is not always necessary23 and technical rules of
procedure are not strictly applied. Hence, the right to cross-examine is not an indispensable
aspect of administrative due process.24 The petitioner cannot, therefore, argue that the
affidavit of Bang-on and his witnesses are hearsay and insufficient to prove his guilt.

At any rate, having actively participated in the proceedings before the CSC-CAR, the CSC,
and the CA, the petitioner was apparently afforded every opportunity to explain his side and
seek reconsideration of the ruling against him. 1âwphi1

As to the issue of the veracity of the affidavits, such is a question of fact which cannot now
be raised before the Court under Rule 45 of the Rules of Court. The CSC-CAR, the CSC and
the CA did not, therefore, err in giving credence to the affidavits of the complainants and his
witnesses, and in consequently ruling that there was substantial evidence to support the
finding of misconduct on the part of the petitioner.

On the Penalty

Assuming that he did box Bang-on, Pat-og argues that there is no substantial evidence to
prove that he did so with a clear intent to violate the law or in flagrant disregard of the
established rule, as required for a finding of grave misconduct. He insists that he was not
motivated by bad faith or ill will because he acted in the belief that, as a teacher, he was
exercising authority over Bang-on in loco parentis, and was, accordingly, within his rights to
discipline his student. Citing his 33 years in the government service without any adverse
record against him and the fact that he is at the edge of retirement, being already 62 years
old, the petitioner prays that, in the name of substantial and compassionate justice, the CSC-
CAR’s finding of simple misconduct and the concomitant penalty of suspension should be
upheld, instead of dismissal.
The Court agrees in part.

Misconduct means intentional wrongdoing or deliberate violation of a rule of law or standard


of behavior. To constitute an administrative offense, misconduct should relate to or be
connected with the performance of the official functions and duties of a public officer. In
grave misconduct, as distinguished from simple misconduct, the elements of corruption,
clear intent to violate the law or t1agrant disregard of an established rule must be manifest.25

Teachers are duly licensed professionals who must not only be competent in the practice of
their noble profession, but must also possess dignity and a reputation with high moral values.
They must strictly adhere to, observe, and practice the set of ethical and moral principles,
standards, and values laid down in the Code of Ethics of Professional Teachers, which apply
to all teachers in schools in the Philippines, whether public or private, as provided in the
preamble of the said Code.26 Section 8 of Article VIII of the same Code expressly provides
that "a teacher shall not inflict corporal punishment on offending learners."

Clearly then, petitioner cannot argue that in punching Bang-on, he was exercising his right as
a teacher in loco parentis to discipline his student. It is beyond cavil that the petitioner, as a
public school teacher, deliberately violated his Code of Ethics. Such violation is a flagrant
disregard for the established rule contained in the said Code tantamount to grave
misconduct.

Under Section 52(A)(2) of Rule IV of the Uniform Rules on Administrative Cases in the Civil
Service, the penalty for grave misconduct is dismissal from the service, which carries with it
the cancellation of eligibility, forfeiture of retirement benefits and perpetual disqualification
from reemployment in the government service.27 This penalty must, however, be tempered
with compassion as there was sut1icient provocation on the part of Bang-on. Considering
further the mitigating circumstances that the petitioner has been in the government service
for 33 years, that this is his first offense and that he is at the cusp of retirement, the Court
finds the penalty of suspension for six months as appropriate under the circumstances.

WHEREFORE, the Court PARTIALLY GRANTS the petition and MODIFIES the April 6, 2011
Decision of the Court of Appeals in CA-G.R. SP No. 101700. Accordingly, Alberto Pat-og, Sr.
is found GUlLTY of Grave Misconduct, but the penalty is reduced from dismissal from the
service to SUSPENSION for SIX MONTHS.

SO ORDERED.
G.R. No. 173946 June 19, 2013

BOSTON EQUITY RESOURCES, INC., Petitioner,


vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1)
the Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the
Court of Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein
respondent's petition for certiorari upon a finding that the trial court committed grave abuse
of discretion in denying respondent's motion to dismiss the complaint against her.3 Based on
this finding, the Court of Appeals reversed and set aside the Orders, dated 8 November
20044 and 22 December 2004,5respectively, of the Regional Trial Court (RTC) of Manila,
Branch 24.

The Facts

On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the
issuance of a writ of preliminary attachment against the spouses Manuel and Lolita
Toledo.6 Herein respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she
filed a Motion for Leave to Admit Amended Answer7 in which she alleged, among others, that
her husband and co-defendant, Manuel Toledo (Manuel), is already dead.8 The death
certificate9 of Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a
motion, dated 5 August 1999, to require respondent to disclose the heirs of Manuel.10 In
compliance with the verbal order of the court during the 11 October 1999 hearing of the
case, respondent submitted the required names and addresses of the heirs.11 Petitioner then
filed a Motion for Substitution,12 dated 18 January 2000, praying that Manuel be substituted
by his children as party-defendants. It appears that this motion was granted by the trial court
in an Order dated 9 October 2000.13

Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order
containing, among others, the dates of hearing of the case.14

The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence
and its exhibits were thereafter admitted.

On 26 May 2004, the reception of evidence for herein respondent was cancelled upon
agreement of the parties. On 24 September 2004, counsel for herein respondent was given a
period of fifteen days within which to file a demurrer to evidence.15 However, on 7 October
2004, respondent instead filed a motion to dismiss the complaint, citing the following as
grounds: (1) that the complaint failed to implead an indispensable party or a real party in
interest; hence, the case must be dismissed for failure to state a cause of action; (2) that the
trial court did not acquire jurisdiction over the person of Manuel pursuant to Section 5, Rule
86 of the Revised Rules of Court; (3) that the trial court erred in ordering the substitution of
the deceased Manuel by his heirs; and (4) that the court must also dismiss the case against
Lolita Toledo in accordance with Section 6, Rule 86 of the Rules of Court.16

The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having
been filed out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that:
"Within the time for but before filing the answer to the complaint or pleading asserting a
claim, a motion to dismiss may be made x x x."17 Respondent’s motion for reconsideration of
the order of denial was likewise denied on the ground that "defendants’ attack on the
jurisdiction of this Court is now barred by estoppel by laches" since respondent failed to raise
the issue despite several chances to do so.18

Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the
trial court seriously erred and gravely abused its discretion in denying her motion to dismiss
despite discovery, during the trial of the case, of evidence that would constitute a ground for
dismissal of the case.19

The Court of Appeals granted the petition based on the following grounds:

It is elementary that courts acquire jurisdiction over the person of the defendant x x x only
when the latter voluntarily appeared or submitted to the court or by coercive process issued
by the court to him, x x x. In this case, it is undisputed that when petitioner Boston filed the
complaint on December 24, 1997, defendant Manuel S. Toledo was already dead, x x x.
Such being the case, the court a quo could not have acquired jurisdiction over the person of
defendant Manuel S. Toledo.

x x x the court a quo’s denial of respondent’s motion to dismiss was based on its finding that
respondent’s attack on the jurisdiction of the court was already barred by laches as
respondent failed to raise the said ground in its [sic] amended answer and during the pre-
trial, despite her active participation in the proceedings.

However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal. By timely raising the issue on jurisdiction in her
motion to dismiss x x x respondent is not estopped from raising the question on jurisdiction.

Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet
decided the case, hence, there is no basis for the court a quo to invoke estoppel to justify its
denial of the motion for reconsideration;

It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was
already dead. The complaint should have impleaded the estate of Manuel S. Toledo as
defendant, not only the wife, considering that the estate of Manuel S. Toledo is an
indispensable party, which stands to be benefited or be injured in the outcome of the case. x
xx

xxxx

Respondent’s motion to dismiss the complaint should have been granted by public
respondent judge as the same was in order. Considering that the obligation of Manuel S.
Toledo is solidary with another debtor, x x x, the claim x x x should be filed against the estate
of Manuel S. Toledo, in conformity with the provision of Section 6, Rule 86 of the Rules of
Court, x x x.20
The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:

1. Respondent is already estopped from questioning the trial court’s jurisdiction;

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is


not an indispensable party;

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not


warranting the dismissal of the case before the lower court; and

4. Since the estate of Manuel is not an indispensable party, it is not necessary that
petitioner file its claim against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial court’s orders denying
respondent’s motion to dismiss.

The Ruling of the Court

We find merit in the petition.

Motion to dismiss filed out of time

To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of
respondent. Well settled is the rule that the special civil action for certiorari is not the proper
remedy to assail the denial by the trial court of a motion to dismiss. The order of the trial
court denying a motion to dismiss is merely interlocutory, as it neither terminates nor finally
disposes of a case and still leaves something to be done by the court before a case is finally
decided on the merits.21 Therefore, "the proper remedy in such a case is to appeal after a
decision has been rendered."22

As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher


Education:23

A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is


resorted only to correct a grave abuse of discretion or a whimsical exercise of judgment
equivalent to lack of jurisdiction. Its function is limited to keeping an inferior court within its
jurisdiction and to relieve persons from arbitrary acts – acts which courts or judges have no
power or authority in law to perform. It is not designed to correct erroneous findings and
conclusions made by the courts. (Emphasis supplied)

Even assuming that certiorari is the proper remedy, the trial court did not commit grave
abuse of discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly
when it issued the questioned orders as respondent’s motion to dismiss was filed SIX
YEARS AND FIVE MONTHS AFTER SHE FILED HER AMENDED ANSWER. This
circumstance alone already warranted the outright dismissal of the motion for having been
filed in clear contravention of the express mandate of Section 1, Rule 16, of the Revised
Rules of Court. Under this provision, a motion to dismiss shall be filed within the time for but
before the filing of an answer to the complaint or pleading asserting a claim.24

More importantly, respondent’s motion to dismiss was filed after petitioner has completed the
presentation of its evidence in the trial court, giving credence to petitioner’s and the trial
court’s conclusion that the filing of the motion to dismiss was a mere ploy on the part of
respondent to delay the prompt resolution of the case against her.

Also worth mentioning is the fact that respondent’s motion to dismiss under consideration
herein is not the first motion to dismiss she filed in the trial court. It appears that she had filed
an earlier motion to dismiss26 on the sole ground of the unenforceability of petitioner’s claim
under the Statute of Frauds, which motion was denied by the trial court. More telling is the
following narration of the trial court in its Order denying respondent’s motion for
reconsideration of the denial of her motion to dismiss:

As can be gleaned from the records, with the admission of plaintiff’s exhibits, reception of
defendants’ evidence was set on March 31, and April 23, 2004 x x x . On motion of the
defendants, the hearing on March 31, 2004 was cancelled.

On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces
tecum to one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004.
Reception of defendants’ evidence was again deferred to May 26, June 2 and June 30,
2004, x x x.

On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic]
evidence was cancelled upon the agreement of the parties. On July 28, 2004, in the absence
of defendants’ witness, hearing was reset to September 24 and October 8, 2004 x x x.

On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to
file a demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to
Dismiss x x x.27

Respondent’s act of filing multiple motions, such as the first and earlier motion to dismiss
and then the motion to dismiss at issue here, as well as several motions for postponement,
lends credibility to the position taken by petitioner, which is shared by the trial court, that
respondent is

deliberately impeding the early disposition of this case. The filing of the second motion to
dismiss was, therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from
deviating or straying off course from established jurisprudence on the matter, x x x had in
fact faithfully observed the law and legal precedents in this case."29 The Court of Appeals,
therefore, erred not only in entertaining respondent’s petition for certiorari, it likewise erred in
ruling that the trial court committed grave abuse of discretion when it denied respondent’s
motion to dismiss.

On whether or not respondent is estopped from


questioning the jurisdiction of the trial court

At the outset, it must be here stated that, as the succeeding discussions will demonstrate,
jurisdiction over the person of Manuel should not be an issue in this case. A protracted
discourse on jurisdiction is, nevertheless, demanded by the fact that jurisdiction has been
raised as an issue from the lower court, to the Court of Appeals and, finally, before this
Court. For the sake of clarity, and in order to finally settle the controversy and fully dispose of
all the issues in this case, it was deemed imperative to resolve the issue of jurisdiction.

1. Aspects of Jurisdiction

Petitioner calls attention to the fact that respondent’s motion to dismiss questioning the trial
court’s jurisdiction was filed more than six years after her amended answer was filed.
According to petitioner, respondent had several opportunities, at various stages of the
proceedings, to assail the trial court’s jurisdiction but never did so for six straight years.
Citing the doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner
claimed that respondent’s failure to raise the question of jurisdiction at an earlier stage bars
her from later questioning it, especially since she actively participated in the proceedings
conducted by the trial court.

Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction
has several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the
parties; (3) jurisdiction over the issues of the case; and (4) in cases involving property,
jurisdiction over the res or the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by
laches is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by
petitioner, the issue involved was the authority of the then Court of First Instance to hear a
case for the collection of a sum of money in the amount of ₱1,908.00 which amount was, at
that time, within the exclusive original jurisdiction of the municipal courts.

In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was
the jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses
Gonzaga v. Court of Appeals,32 the issue for consideration was the authority of the regional
trial court to hear and decide an action for reformation of contract and damages involving a
subdivision lot, it being argued therein that jurisdiction is vested in the Housing and Land Use
Regulatory Board pursuant to PD 957 (The Subdivision and Condominium Buyers Protective
Decree). In Lee v. Presiding Judge, MTC, Legaspi City,33 petitioners argued that the
respondent municipal trial court had no jurisdiction over the complaint for ejectment because
the issue of ownership was raised in the pleadings. Finally, in People v. Casuga,34 accused-
appellant claimed that the crime of grave slander, of which she was charged, falls within the
concurrent jurisdiction of municipal courts or city courts and the then courts of first instance,
and that the judgment of the court of first instance, to which she had appealed the municipal
court's conviction, should be deemed null and void for want of jurisdiction as her appeal
should have been filed with the Court of Appeals or the Supreme Court.

In all of these cases, the Supreme Court barred the attack on the jurisdiction of the
respective courts concerned over the subject matter of the case based on estoppel by
laches, declaring that parties cannot be allowed to belatedly adopt an inconsistent posture by
attacking the jurisdiction of a court to which they submitted their cause voluntarily.35

Here, what respondent was questioning in her motion to dismiss before the trial court was
that court’s jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel
by laches finds no application in this case. Instead, the principles relating to jurisdiction over
the person of the parties are pertinent herein.

The Rules of Court provide:


RULE 9
EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived. However, when it appears
from the pleadings or the evidence on record that the court has no jurisdiction over the
subject matter, that there is another action pending between the same parties for the same
cause, or that the action is barred by a prior judgment or by statute of limitations, the court
shall dismiss the claim.

RULE 15
MOTIONS

Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a motion


attacking a pleading, order, judgment, or proceeding shall include all objections then
available, and all objections not so included shall be deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not
waived even if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the
subject matter. x x x Lack of jurisdiction over the subject matter can always be raised
anytime, even for the first time on appeal, since jurisdictional issues cannot be waived x x x
subject, however, to the principle of estoppel by laches."36

Since the defense of lack of jurisdiction over the person of a party to a case is not one of
those defenses which are not deemed waived under Section 1 of Rule 9, such defense must
be invoked when an answer or a motion to dismiss is filed in order to prevent a waiver of the
defense.37 If the objection is not raised either in a motion to dismiss or in the answer, the
objection to the jurisdiction over the person of the plaintiff or the defendant is deemed waived
by virtue of the first sentence of the above-quoted Section 1 of Rule 9 of the Rules of Court.38

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its
questioned decision, stating that "issue on jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal" and that, therefore, respondent timely raised
the issue in her motion to dismiss and is, consequently, not estopped from raising the
question of jurisdiction. As the question of jurisdiction involved here is that over the person of
the defendant Manuel, the same is deemed waived if not raised in the answer or a motion to
dismiss. In any case, respondent cannot claim the defense since "lack of jurisdiction over the
person, being subject to waiver, is a personal defense which can only be asserted by the
party who can thereby waive it by silence."39

2. Jurisdiction over the person of a defendant is acquired through a valid service of


summons; trial court did not acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court.
A defendant is informed of a case against him when he receives summons. "Summons is a
writ by which the defendant is notified of the action brought against him. Service of such writ
is the means by which the court acquires jurisdiction over his person."40

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since
there was no valid service of summons upon him, precisely because he was already dead
even before the complaint against him and his wife was filed in the trial court. The issues
presented in this case are similar to those in the case of Sarsaba v. Vda. de Te.41
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally
dismissed from employment and ordering the payment of his monetary claims. To satisfy the
claim, a truck in the possession of Sereno’s employer was levied upon by a sheriff of the
NLRC, accompanied by Sereno and his lawyer, Rogelio Sarsaba, the petitioner in that case.
A complaint for recovery of motor vehicle and damages, with prayer for the delivery of the
truck pendente lite was eventually filed against Sarsaba, Sereno, the NLRC sheriff and the
NLRC by the registered owner of the truck. After his motion to dismiss was denied by the trial
court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus motion to
dismiss citing, as one of the grounds, lack of jurisdiction over one of the principal defendants,
in view of the fact that Sereno was already dead when the complaint for recovery of
possession was filed.

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one
of the issues submitted for resolution in both cases is similar: whether or not a case, where
one of the named defendants was already dead at the time of its filing, should be dismissed
so that the claim may be pursued instead in the proceedings for the settlement of the estate
of the deceased defendant. The petitioner in the Sarsaba Case claimed, as did respondent
herein, that since one of the defendants died before summons was served on him, the trial
court should have dismissed the complaint against all the defendants and the claim should
be filed against the estate of the deceased defendant. The petitioner in Sarsaba, therefore,
prayed that the complaint be dismissed, not only against Sereno, but as to all the
defendants, considering that the RTC did not acquire jurisdiction over the person of
Sereno.42 This is exactly the same prayer made by respondent herein in her motion to
dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:

x x x We cannot countenance petitioner’s argument that the complaint against the other
defendants should have been dismissed, considering that the RTC never acquired
jurisdiction over the person of Sereno. The court’s failure to acquire jurisdiction over one’s
person is a defense which is personal to the person claiming it. Obviously, it is now
impossible for Sereno to invoke the same in view of his death. Neither can petitioner invoke
such ground, on behalf of Sereno, so as to reap the benefit of having the case dismissed
against all of the defendants. Failure to serve summons on Sereno’s person will not be a
cause for the dismissal of the complaint against the other defendants, considering that they
have been served with copies of the summons and complaints and have long submitted their
respective responsive pleadings. In fact, the other defendants in the complaint were given
the chance to raise all possible defenses and objections personal to them in their respective
motions to dismiss and their subsequent answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against
Sereno only.

Based on the foregoing pronouncements, there is no basis for dismissing the complaint
against respondent herein. Thus, as already emphasized above, the trial court correctly
denied her motion to dismiss.

On whether or not the estate of Manuel

Toledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:


SEC. 7. Compulsory joinder of indispensable parties. – Parties-in-interest without whom no
final determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter
of a case that a final adjudication cannot be made in his or her absence, without injuring or
affecting that interest. He or she is a party who has not only an interest in the subject matter
of the controversy, but "an interest of such nature that a final decree cannot be made without
affecting that interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective, complete or
equitable." Further, an indispensable party is one who must be included in an action before it
may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or
subject matter is separable from the interest of the other parties, so that it will not necessarily
be directly or injuriously affected by a decree which does complete justice between them.
Also, a person is not an indispensable party if his presence would merely permit complete
relief between him or her and those already parties to the action, or if he or she has no
interest in the subject matter of the action." It is not a sufficient reason to declare a person to
be an indispensable party simply because his or her presence will avoid multiple litigations.45

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of
Manuel is not an indispensable party to the collection case, for the simple reason that the
obligation of Manuel and his wife, respondent herein, is solidary.

The contract between petitioner, on the one hand and respondent and respondent’s
husband, on the other, states:

FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON
EQUITY RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED
(₱1,400,000.00)] x x x.47

The provisions and stipulations of the contract were then followed by the respective
signatures of respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant
to Article 1216 of the Civil Code, petitioner may collect the entire amount of the obligation
from respondent only. The aforementioned provision states: "The creditor may proceed
against any one of the solidary debtors or some or all of them simultaneously. The demand
made against one of them shall not be an obstacle to those which may subsequently be
directed against the others, so long as the debt has not been fully collected."

In other words, the collection case can proceed and the demands of petitioner can be
satisfied by respondent only, even without impleading the estate of Manuel. Consequently,
the estate of Manuel is not an indispensable party to petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the
claim of petitioner should have been filed against the estate of Manuel in accordance with
Sections 5 and 6 of Rule 86 of the Rules of Court. The aforementioned provisions provide:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All
claims for money against the decedent, arising from contract, express or implied, whether
the same be due, not due, or contingent, all claims for funeral expenses and judgment for
money against the decedent, must be filed within the time limited in the notice; otherwise,
they are barred forever, except that they may be set forth as counterclaims in any action that
the executor or administrator may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with
another debtor, the claim shall be filed against the decedent as if he were the only debtor,
without prejudice to the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule
86 of the Revised Rules of Court, which latter provision has been retained in the present
Rules of Court without any revisions, the Supreme Court, in the case of Manila Surety &
Fidelity Co., Inc. v. Villarama, et. al.,49 held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was
taken, this Court held that where two persons are bound in solidum for the same debt and
one of them dies, the whole indebtedness can be proved against the estate of the latter, the
decedent’s liability being absolute and primary; x x x. It is evident from the foregoing that
Section 6 of Rule 87 provides the procedure should the creditor desire to go against the
deceased debtor, but there is certainly nothing in the said provision making compliance with
such procedure a condition precedent before an ordinary action against the surviving
solidary debtors, should the creditor choose to demand payment from the latter, could be
entertained to the extent that failure to observe the same would deprive the court jurisdiction
to take cognizance of the action against the surviving debtors. Upon the other hand, the Civil
Code expressly allows the creditor to proceed against any one of the solidary debtors or
some or all of them simultaneously. There is, therefore, nothing improper in the creditor’s
filing of an action against the surviving solidary debtors alone, instead of instituting a
proceeding for the settlement of the estate of the deceased debtor wherein his claim could
be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National
Bank v. Asuncion51where the Supreme Court pronounced:

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing
therein prevents a creditor from proceeding against the surviving solidary debtors. Said
provision merely sets up the procedure in enforcing collection in case a creditor chooses to
pursue his claim against the estate of the deceased solidary debtor. The rule has been set
forth that a creditor (in a solidary obligation) has the option whether to file or not to file a
claim against the estate of the solidary debtor. x x x

xxxx

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this
matter. Said provision gives the creditor the right to "proceed against anyone of the solidary
debtors or some or all of them simultaneously." The choice is undoubtedly left to the solidary
creditor to determine against whom he will enforce collection. In case of the death of one of
the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving
solidary debtors without necessity of filing a claim in the estate of the deceased debtors. It is
not mandatory for him to have the case dismissed as against the surviving debtors and file
its claim against the estate of the deceased solidary debtor, x x x. For to require the creditor
to proceed against the estate, making it a condition precedent for any collection action
against the surviving debtors to prosper, would deprive him of his substantive rightsprovided
by Article 1216 of the New Civil Code. (Emphasis supplied.)

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were
applied literally, Article 1216 of the New Civil Code would, in effect, be repealed since under
the Rules of Court, petitioner has no choice but to proceed against the estate of [the
deceased debtor] only. Obviously, this provision diminishes the [creditor’s] right under the
New Civil Code to proceed against any one, some or all of the solidary debtors. Such a
construction is not sanctioned by principle, which is too well settled to require citation, that a
substantive law cannot be amended by a procedural rule. Otherwise stated, Section 6, Rule
86 of the Revised Rules of Court cannot be made to prevail over Article 1216 of the New
Civil Code, the former being merely procedural, while the latter, substantive.

Based on the foregoing, the estate of Manuel is not an indispensable party and the case can
proceed as against respondent only. That petitioner opted to collect from respondent and not
from the estate of Manuel is evidenced by its opposition to respondent’s motion to dismiss
asserting that the case, as against her, should be dismissed so that petitioner can proceed
against the estate of Manuel.

On whether or not the inclusion of Manuel as


party defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of
parties is ground for dismissal of an action. Parties may be dropped or added by order of the
court on motion of any party or on its own initiative at any stage of the action and on such
terms as are just. Any claim against a misjoined party may be severed and proceeded with
separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have
the capacity to sue or be sued in the event that the claim by or against the misjoined party is
pursued in a separate case. In this case, therefore, the inclusion of Manuel in the complaint
cannot be considered a misjoinder, as in fact, the action would have proceeded against him
had he been alive at the time the collection case was filed by petitioner. This being the case,
the remedy provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as
party-defendant cannot simply be dropped from the case. Instead, the procedure taken by
the Court in Sarsaba v. Vda. de Te,52whose facts, as mentioned earlier, resemble those of
this case, should be followed herein. There, the Supreme Court agreed with the trial court
when it resolved the issue of jurisdiction over the person of the deceased Sereno in this
wise:

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over
the person of Patricio Sereno since there was indeed no valid service of summons insofar as
Patricio Sereno is concerned. Patricio Sereno died before the summons, together with a
copy of the complaint and its annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the
defendants herein, does not render the action DISMISSIBLE, considering that the three (3)
other defendants, x x x, were validly served with summons and the case with respect to the
answering defendants may still proceed independently. Be it recalled that the three (3)
answering defendants have previously filed a Motion to Dismiss the Complaint which was
denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed
as a claim against the estate of Patricio Sereno, but the case with respect to the three (3)
other accused [sic] will proceed. (Emphasis supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of
Rule 3 of the Rules of Court, which states that: only natural or juridical persons, or entities
authorized by law may be parties in a civil action." Applying this provision of law, the Court,
in the case of Ventura v. Militante,54 held:

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court


of justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a
person in law and possessed of a legal entity as either a natural or an artificial person, and
no suit can be lawfully prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he
institutes a judicial proceeding, to name the proper party defendant to his cause of action. In
a suit or proceeding in personam of an adversary character, the court can acquire no
jurisdiction for the purpose of trial or judgment until a party defendant who actually or legally
exists and is legally capable of being sued, is brought before it. It has even been held that
the question of the legal personality of a party defendant is a question of substance going to
the jurisdiction of the court and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by
surviving spouse Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the
1âw phi 1

same on the ground that the defendant as named in the complaint had no legal personality.
We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same
extent, a decedent does not have the capacity to be sued and may not be named a party
defendant in a court action. (Emphases supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized
by law, the complaint may be dismissed on the ground that the pleading asserting the claim
states no cause of action or for failure to state a cause of action pursuant to Section 1(g) of
Rule 16 of the Rules of Court, because a complaint cannot possibly state a cause of action
against one who cannot be a party to a civil action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-
defendant is the dismissal of the case as against him, thus did the trial court err when it
ordered the substitution of Manuel by his heirs. Substitution is proper only where the party to
be substituted died during the pendency of the case, as expressly provided for by Section
16, Rule 3 of the Rules of Court, which states:

Death of party;duty of counsel. – Whenever a party to a pending action dies, and the claim is
not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty
(30) days after such death of the fact thereof, and to give the name and address of his legal
representative or representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator x x x.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court
never acquired jurisdiction over his person and, in effect, there was no party to be
substituted.

WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the
Resolution dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are
REVERSED and SET ASIDE. The Orders of the Regional Trial Court dated 8 November
2004 and 22 December 2004, respectively, in Civil Case No. 97-86672, are REINSTATED.
The Regional Trial Court, Branch 24, Manila is hereby DIRECTED to proceed with the trial of
Civil Case No. 97-86672 against respondent Lolita G. Toledo only, in accordance with the
above pronouncements of the Court, and to decide the case with dispatch.

SO ORDERED.
G.R. No. 168539 March 25, 2014

PEOPLE OF THE PHILIPPINES, Petitioner,


vs.
HENRY T. GO, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari assailing the Resolution1 of the Third
Division2 of the Sandiganbayan (SB) dated June 2, 2005 which quashed the Information filed
against herein respondent for alleged violation of Section 3 (g) of Republic Act No. 3019
(R.A. 3019), otherwise known as the Anti-Graft and Corrupt Practices Act.

The Information filed against respondent is an offshoot of this Court's Decision3 in Agan, Jr.
v. Philippine International Air Terminals Co., Inc. which nullified the various contracts
awarded by the Government, through the Department of Transportation and
Communications (DOTC), to Philippine Air Terminals, Co., Inc. (PIATCO) for the
construction, operation and maintenance of the Ninoy Aquino International Airport
International Passenger Terminal III (NAIA IPT III). Subsequent to the above Decision, a
certain Ma. Cecilia L. Pesayco filed a complaint with the Office of the Ombudsman against
several individuals for alleged violation of R.A. 3019. Among those charged was herein
respondent, who was then the Chairman and President of PIATCO, for having supposedly
conspired with then DOTC Secretary Arturo Enrile (Secretary Enrile) in entering into a
contract which is grossly and manifestly disadvantageous to the government.

On September 16, 2004, the Office of the Deputy Ombudsman for Luzon found probable
cause to indict, among others, herein respondent for violation of Section 3(g) of R.A. 3019.
While there was likewise a finding of probable cause against Secretary Enrile, he was no
longer indicted because he died prior to the issuance of the resolution finding probable
cause.

Thus, in an Information dated January 13, 2005, respondent was charged before the SB as
follows:

On or about July 12, 1997, or sometime prior or subsequent thereto, in Pasay City, Metro
Manila, Philippines and within the jurisdiction of this Honorable Court, the late ARTURO
ENRILE, then Secretary of the Department of Transportation and Communications (DOTC),
committing the offense in relation to his office and taking advantage of the same, in
conspiracy with accused, HENRY T. GO, Chairman and President of the Philippine
International Air Terminals, Co., Inc. (PIATCO), did then and there, willfully, unlawfully and
criminally enter into a Concession Agreement, after the project for the construction of the
Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT III) was
awarded to Paircargo Consortium/PIATCO, which Concession Agreement substantially
amended the draft Concession Agreement covering the construction of the NAIA IPT III
under Republic Act 6957, as amended by Republic Act 7718 (BOT law), specifically the
provision on Public Utility Revenues, as well as the assumption by the government of the
liabilities of PIATCO in the event of the latter's default under Article IV, Section 4.04 (b) and
(c) in relation to Article 1.06 of the Concession Agreement, which terms are more beneficial
to PIATCO while manifestly and grossly disadvantageous to the government of the Republic
of the Philippines.4

The case was docketed as Criminal Case No. 28090.

On March 10, 2005, the SB issued an Order, to wit:

The prosecution is given a period of ten (10) days from today within which to show cause
why this case should not be dismissed for lack of jurisdiction over the person of the accused
considering that the accused is a private person and the public official Arturo Enrile, his
alleged co-conspirator, is already deceased, and not an accused in this case.5

The prosecution complied with the above Order contending that the SB has already acquired
jurisdiction over the person of respondent by reason of his voluntary appearance, when he
filed a motion for consolidation and when he posted bail. The prosecution also argued that
the SB has exclusive jurisdiction over respondent's case, even if he is a private person,
because he was alleged to have conspired with a public officer.6

On April 28, 2005, respondent filed a Motion to Quash7 the Information filed against him on
the ground that the operative facts adduced therein do not constitute an offense under
Section 3(g) of R.A. 3019. Respondent, citing the show cause order of the SB, also
contended that, independently of the deceased Secretary Enrile, the public officer with whom
he was alleged to have conspired, respondent, who is not a public officer nor was
capacitated by any official authority as a government agent, may not be prosecuted for
violation of Section 3(g) of R.A. 3019.

The prosecution filed its Opposition.8

On June 2, 2005, the SB issued its assailed Resolution, pertinent portions of which read
thus:

Acting on the Motion to Quash filed by accused Henry T. Go dated April 22, 2005, and it
appearing that Henry T. Go, the lone accused in this case is a private person and his alleged
co-conspirator-public official was already deceased long before this case was filed in court,
for lack of jurisdiction over the person of the accused, the Court grants the Motion to Quash
and the Information filed in this case is hereby ordered quashed and dismissed.9

Hence, the instant petition raising the following issues, to wit:

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED A


QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR
APPLICABLE JURISPRUDENCE IN GRANTING THE DEMURRER TO EVIDENCE AND IN
DISMISSING CRIMINAL CASE NO. 28090 ON THE GROUND THAT IT HAS NO
JURISDICTION OVER THE PERSON OF RESPONDENT GO.

II

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED AND DECIDED A


QUESTION OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW OR
APPLICABLE JURISPRUDENCE, IN RULING THAT IT HAS NO JURISDICTION OVER
THE PERSON OF RESPONDENT GO DESPITE THE IRREFUTABLE FACT THAT HE HAS
ALREADY POSTED BAIL FOR HIS PROVISIONAL LIBERTY

III

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED WHEN, IN COMPLETE


DISREGARD OF THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION, IT
QUASHED THE INFORMATION AND DISMISSED CRIMINAL CASE NO. 2809010

The Court finds the petition meritorious.

Section 3 (g) of R.A. 3019 provides:

Sec. 3. Corrupt practices of public officers. – In addition to acts or omissions of public officers
already penalized by existing law, the following shall constitute corrupt practices of any
public officer and are hereby declared to be unlawful:

xxxx

(g) Entering, on behalf of the Government, into any contract or transaction manifestly and
grossly disadvantageous to the same, whether or not the public officer profited or will profit
thereby.

The elements of the above provision are:

(1) that the accused is a public officer;

(2) that he entered into a contract or transaction on behalf of the government; and

(3) that such contract or transaction is grossly and manifestly disadvantageous to the
government.11

At the outset, it bears to reiterate the settled rule that private persons, when acting in
conspiracy with public officers, may be indicted and, if found guilty, held liable for the
pertinent offenses under Section 3 of R.A. 3019, in consonance with the avowed policy of the
anti-graft law to repress certain acts of public officers and private persons alike constituting
graft or corrupt practices act or which may lead thereto.12 This is the controlling doctrine as
enunciated by this Court in previous cases, among which is a case involving herein private
respondent.13

The only question that needs to be settled in the present petition is whether herein
respondent, a private person, may be indicted for conspiracy in violating Section 3(g) of R.A.
3019 even if the public officer, with whom he was alleged to have conspired, has died prior to
the filing of the Information.

Respondent contends that by reason of the death of Secretary Enrile, there is no public
officer who was charged in the Information and, as such, prosecution against respondent
may not prosper.

The Court is not persuaded.


It is true that by reason of Secretary Enrile's death, there is no longer any public officer with
whom respondent can be charged for violation of R.A. 3019. It does not mean, however, that
the allegation of conspiracy between them can no longer be proved or that their alleged
conspiracy is already expunged. The only thing extinguished by the death of Secretary Enrile
is his criminal liability. His death did not extinguish the crime nor did it remove the basis of
the charge of conspiracy between him and private respondent. Stated differently, the death
of Secretary Enrile does not mean that there was no public officer who allegedly violated
Section 3 (g) of R.A. 3019. In fact, the Office of the Deputy Ombudsman for Luzon found
probable cause to indict Secretary Enrile for infringement of Sections 3 (e) and (g) of R.A.
3019.14 Were it not for his death, he should have been charged.

The requirement before a private person may be indicted for violation of Section 3(g) of R.A.
3019, among others, is that such private person must be alleged to have acted in conspiracy
with a public officer. The law, however, does not require that such person must, in all
instances, be indicted together with the public officer. If circumstances exist where the public
officer may no longer be charged in court, as in the present case where the public officer has
already died, the private person may be indicted alone.

Indeed, it is not necessary to join all alleged co-conspirators in an indictment for


conspiracy.15 If two or more persons enter into a conspiracy, any act done by any of them
pursuant to the agreement is, in contemplation of law, the act of each of them and they are
jointly responsible therefor.16 This means that everything said, written or done by any of the
conspirators in execution or furtherance of the common purpose is deemed to have been
said, done, or written by each of them and it makes no difference whether the actual actor is
alive or dead, sane or insane at the time of trial.17 The death of one of two or more
conspirators does not prevent the conviction of the survivor or survivors.18 Thus, this Court
held that:

x x x [a] conspiracy is in its nature a joint offense. One person cannot conspire alone. The
crime depends upon the joint act or intent of two or more persons. Yet, it does not follow that
one person cannot be convicted of conspiracy. So long as the acquittal or death of a co-
conspirator does not remove the bases of a charge for conspiracy, one defendant may be
found guilty of the offense.19

The Court agrees with petitioner's contention that, as alleged in the Information filed against
respondent, which is deemed hypothetically admitted in the latter's Motion to Quash, he
(respondent) conspired with Secretary Enrile in violating Section 3 (g) of R.A. 3019 and that
in conspiracy, the act of one is the act of all. Hence, the criminal liability incurred by a co-
conspirator is also incurred by the other co-conspirators.

Moreover, the Court agrees with petitioner that the avowed policy of the State and the
legislative intent to repress "acts of public officers and private persons alike, which constitute
graft or corrupt practices,"20 would be frustrated if the death of a public officer would bar the
prosecution of a private person who conspired with such public officer in violating the Anti-
Graft Law.

In this regard, this Court's disquisition in the early case of People v. Peralta 21 as to the nature
of and the principles governing conspiracy, as construed under Philippine jurisdiction, is
instructive, to wit:

x x x A conspiracy exists when two or more persons come to an agreement concerning the
commission of a felony and decide to commit it. Generally, conspiracy is not a crime except
when the law specifically provides a penalty therefor as in treason, rebellion and sedition.
The crime of conspiracy known to the common law is not an indictable offense in the
Philippines. An agreement to commit a crime is a reprehensible act from the view-point of
morality, but as long as the conspirators do not perform overt acts in furtherance of their
malevolent design, the sovereignty of the State is not outraged and the tranquility of the
public remains undisturbed.

However, when in resolute execution of a common scheme, a felony is committed by two or


more malefactors, the existence of a conspiracy assumes pivotal importance in the
determination of the liability of the perpetrators. In stressing the significance of conspiracy in
criminal law, this Court in U.S. vs. Infante and Barreto opined that

While it is true that the penalties cannot be imposed for the mere act of conspiring to commit
a crime unless the statute specifically prescribes a penalty therefor, nevertheless the
existence of a conspiracy to commit a crime is in many cases a fact of vital importance, when
considered together with the other evidence of record, in establishing the existence, of the
consummated crime and its commission by the conspirators.

Once an express or implied conspiracy is proved, all of the conspirators are liable as co-
principals regardless of the extent and character of their respective active participation in the
commission of the crime or crimes perpetrated in furtherance of the conspiracy because in
contemplation of law the act of one is the act of all. The foregoing rule is anchored on the
sound principle that "when two or more persons unite to accomplish a criminal object,
whether through the physical volition of one, or all, proceeding severally or collectively, each
individual whose evil will actively contributes to the wrong-doing is in law responsible for the
whole, the same as though performed by himself alone." Although it is axiomatic that no one
is liable for acts other than his own, "when two or more persons agree or conspire to commit
a crime, each is responsible for all the acts of the others, done in furtherance of the
agreement or conspiracy." The imposition of collective liability upon the conspirators is
clearly explained in one case where this Court held that x x x it is impossible to graduate the
separate liability of each (conspirator) without taking into consideration the close and
inseparable relation of each of them with the criminal act, for the commission of which they
all acted by common agreement x x x. The crime must therefore in view of the solidarity of
the act and intent which existed between the x x x accused, be regarded as the act of the
band or party created by them, and they are all equally responsible x x x

Verily, the moment it is established that the malefactors conspired and confederated in the
commission of the felony proved, collective liability of the accused conspirators attaches by
reason of the conspiracy, and the court shall not speculate nor even investigate as to the
actual degree of participation of each of the perpetrators present at the scene of the crime.
Of course, as to any conspirator who was remote from the situs of aggression, he could be
drawn within the enveloping ambit of the conspiracy if it be proved that through his moral
ascendancy over the rest of the conspirators the latter were moved or impelled to carry out
the conspiracy.

In fine, the convergence of the wills of the conspirators in the scheming and execution of the
crime amply justifies the imputation to all of them the act of any one of them. It is in this light
that conspiracy is generally viewed not as a separate indictable offense, but a rule for
collectivizing criminal liability.

xxxx
x x x A time-honored rule in the corpus of our jurisprudence is that once conspiracy is
proved, all of the conspirators who acted in furtherance of the common design are liable as
co-principals. This rule of collective criminal liability emanates from the ensnaring nature of
conspiracy. The concerted action of the conspirators in consummating their common
purpose is a patent display of their evil partnership, and for the consequences of such
criminal enterprise they must be held solidarily liable.22

This is not to say, however, that private respondent should be found guilty of conspiring with
Secretary Enrile. It is settled that the absence or presence of conspiracy is factual in nature
and involves evidentiary matters.23 Hence, the allegation of conspiracy against respondent is
better left ventilated before the trial court during trial, where respondent can adduce evidence
to prove or disprove its presence.

Respondent claims in his Manifestation and Motion24 as well as in his Urgent Motion to
Resolve25 that in a different case, he was likewise indicted before the SB for conspiracy with
the late Secretary Enrile in violating the same Section 3 (g) of R.A. 3019 by allegedly
entering into another agreement (Side Agreement) which is separate from the Concession
Agreement subject of the present case. The case was docketed as Criminal Case No.
28091. Here, the SB, through a Resolution, granted respondent's motion to quash the
Information on the ground that the SB has no jurisdiction over the person of respondent. The
prosecution questioned the said SB Resolution before this Court via a petition for review on
certiorari. The petition was docketed as G.R. No. 168919. In a minute resolution dated
August 31, 2005, this Court denied the petition finding no reversible error on the part of the
SB. This Resolution became final and executory on January 11, 2006. Respondent now
argues that this Court's resolution in G.R. No. 168919 should be applied in the instant case.

The Court does not agree. Respondent should be reminded that prior to this Court's ruling in
G.R. No. 168919, he already posted bail for his provisional liberty. In fact, he even filed a
Motion for Consolidation26 in Criminal Case No. 28091. The Court agrees with petitioner's
contention that private respondent's act of posting bail and filing his Motion for Consolidation
vests the SB with jurisdiction over his person. The rule is well settled that the act of an
accused in posting bail or in filing motions seeking affirmative relief is tantamount to
submission of his person to the jurisdiction of the court.27

Thus, it has been held that:

When a defendant in a criminal case is brought before a competent court by virtue of a


warrant of arrest or otherwise, in order to avoid the submission of his body to the jurisdiction
of the court he must raise the question of the court’s jurisdiction over his person at the very
earliest opportunity. If he gives bail, demurs to the complaint or files any dilatory plea or
pleads to the merits, he thereby gives the court jurisdiction over his person. (State ex rel.
John Brown vs. Fitzgerald, 51 Minn., 534)

xxxx

As ruled in La Naval Drug vs. CA [236 SCRA 78, 86]:

"[L]ack of jurisdiction over the person of the defendant may be waived either expressly or
impliedly. When a defendant voluntarily appears, he is deemed to have submitted himself to
the jurisdiction of the court. If he so wishes not to waive this defense, he must do so
seasonably by motion for the purpose of objecting to the jurisdiction of the court; otherwise,
he shall be deemed to have submitted himself to that jurisdiction."
Moreover, "[w]here the appearance is by motion for the purpose of objecting to the
jurisdiction of the court over the person, it must be for the sole and separate purpose of
objecting to said jurisdiction. If the appearance is for any other purpose, the defendant is
deemed to have submitted himself to the jurisdiction of the court. Such an appearance gives
the court jurisdiction over the person."

Verily, petitioner’s participation in the proceedings before the Sandiganbayan was not
confined to his opposition to the issuance of a warrant of arrest but also covered other
matters which called for respondent court’s exercise of its jurisdiction. Petitioner may not be
heard now to deny said court’s jurisdiction over him. x x x.28

In the instant case, respondent did not make any special appearance to question the
jurisdiction of the SB over his person prior to his posting of bail and filing his Motion for
Consolidation. In fact, his Motion to Quash the Information in Criminal Case No. 28090 only
came after the SB issued an Order requiring the prosecution to show cause why the case
should not be dismissed for lack of jurisdiction over his person.

As a recapitulation, it would not be amiss to point out that the instant case involves a contract
entered into by public officers representing the government. More importantly, the SB is a
special criminal court which has exclusive original jurisdiction in all cases involving violations
of R.A. 3019 committed by certain public officers, as enumerated in P.D. 1606 as amended
by R.A. 8249. This includes private individuals who are charged as co-principals,
accomplices or accessories with the said public officers. In the instant case, respondent is
being charged for violation of Section 3(g) of R.A. 3019, in conspiracy with then Secretary
Enrile. Ideally, under the law, both respondent and Secretary Enrile should have been
charged before and tried jointly by the Sandiganbayan. However, by reason of the death of
the latter, this can no longer be done. Nonetheless, for reasons already discussed, it does
not follow that the SB is already divested of its jurisdiction over the person of and the case
involving herein respondent. To rule otherwise would mean that the power of a court to
decide a case would no longer be based on the law defining its jurisdiction but on other
factors, such as the death of one of the alleged offenders.

Lastly, the issues raised in the present petition involve matters which are mere incidents in
the main case and the main case has already been pending for over nine (9) years. Thus, a
referral of the case to the Regional Trial Court would further delay the resolution of the main
case and it would, by no means, promote respondent's right to a speedy trial and a speedy
disposition of his case.

WHEREFORE, the petition is GRANTED. The Resolution of the Sandiganbayan dated June
2, 2005, granting respondent's Motion to Quash, is hereby REVERSED and SET ASIDE.
The Sandiganbayan is forthwith DIRECTED to proceed with deliberate dispatch in the
disposition of Criminal Case No. 28090.

SO ORDERED.
G.R. No. 175723 February 4, 2014

THE CITY OF MANILA, represented by MAYOR JOSE L. ATIENZA, JR., and MS.
LIBERTY M. TOLEDO, in her capacity as the City Treasurer of Manila, Petitioners,
vs.
HON. CARIDAD H. GRECIA-CUERDO, in her capacity as Presiding Judge of the
Regional Trial Court, Branch 112, Pasay City; SM MART, INC.; SM PRIME HOLDINGS,
INC.; STAR APPLIANCES CENTER; SUPERVALUE, INC.; ACE HARDWARE
PHILIPPINES, INC.; WATSON PERSONAL CARE STORES, PHILS., INC.; JOLLIMART
PHILS., CORP.; SURPLUS MARKETING CORPORATION and SIGNATURE
LINES, Respondents.

DECISION

PERALTA, J.:

Before the Court is a special civil action for certiorari under Rule 65 of the Rules of Court
seeking to reverse and set aside the Resolutions1 dated April 6, 2006 and November 29,
2006 of the Court of Appeals (CA) in CA-G.R. SP No. 87948.

The antecedents of the case, as summarized by the CA, are as follows:

The record shows that petitioner City of Manila, through its treasurer, petitioner Liberty
Toledo, assessed taxes for the taxable period from January to December 2002 against
private respondents SM Mart, Inc., SM Prime Holdings, Inc., Star Appliances Center,
Supervalue, Inc., Ace Hardware Philippines, Inc., Watsons Personal Care Stores Phils., Inc.,
Jollimart Philippines Corp., Surplus Marketing Corp. and Signature Lines. In addition to the
taxes purportedly due from private respondents pursuant to Section 14, 15, 16, 17 of the
Revised Revenue Code of Manila (RRCM), said assessment covered the local business
taxes petitioners were authorized to collect under Section 21 of the same Code. Because
payment of the taxes assessed was a precondition for the issuance of their business permits,
private respondents were constrained to pay the ₱19,316,458.77 assessment under protest.

On January 24, 2004, private respondents filed [with the Regional Trial Court of Pasay City]
the complaint denominated as one for "Refund or Recovery of Illegally and/or Erroneously-
Collected Local Business Tax, Prohibition with Prayer to Issue TRO and Writ of Preliminary
Injunction"

which was docketed as Civil Case No. 04-0019-CFM before public respondent's sala [at
Branch 112]. In the amended complaint they filed on February 16, 2004, private respondents
alleged that, in relation to Section 21 thereof, Sections 14, 15, 16, 17, 18, 19 and 20 of the
RRCM were violative of the limitations and guidelines under Section 143 (h) of Republic Act.
No. 7160 [Local Government Code] on double taxation. They further averred that petitioner
city's Ordinance No. 8011 which amended pertinent portions of the RRCM had already been
declared to be illegal and unconstitutional by the Department of Justice.2

In its Order3 dated July 9, 2004, the RTC granted private respondents' application for a writ of
preliminary injunction.

Petitioners filed a Motion for Reconsideration4 but the RTC denied it in its Order5 dated
October 15, 2004.
Petitioners then filed a special civil action for certiorari with the CA assailing the July 9, 2004
and October 15, 2004 Orders of the RTC.6

In its Resolution promulgated on April 6, 2006, the CA dismissed petitioners' petition for
certiorari holding that it has no jurisdiction over the said petition. The CA ruled that since
appellate jurisdiction over private respondents' complaint for tax refund, which was filed with
the RTC, is vested in the Court of Tax Appeals (CTA), pursuant to its expanded jurisdiction
under Republic Act No. 9282 (RA 9282), it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case should, likewise, be filed with the
CTA.

Petitioners filed a Motion for Reconsideration,7 but the CA denied it in its Resolution dated
November 29, 2006.

Hence, the present petition raising the following issues:

I- Whether or not the Honorable Court of Appeals gravely erred in dismissing the
case for lack of jurisdiction.

II- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction in enjoining by issuing a Writ of Injunction
the petitioners, their agents and/or authorized representatives from implementing
Section 21 of the Revised Revenue Code of Manila, as amended, against private
respondents.

III- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction in issuing the Writ of Injunction despite
failure of private respondents to make a written claim for tax credit or refund with the
City Treasurer of Manila.

IV- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction considering that under Section 21 of the
Manila Revenue Code, as amended, they are mere collecting agents of the City
Government.

V- Whether or not the Honorable Regional Trial Court gravely abuse[d] its discretion
amounting to lack or excess of jurisdiction in issuing the Writ of Injunction because
petitioner City of Manila and its constituents would result to greater damage and
prejudice thereof. (sic)8

Without first resolving the above issues, this Court finds that the instant petition should be
denied for being moot and academic.

Upon perusal of the original records of the instant case, this Court discovered that a
Decision9 in the main case had already been rendered by the RTC on August 13, 2007, the
dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing, this Court hereby renders JUDGMENT in favor of
the plaintiff and against the defendant to grant a tax refund or credit for taxes paid pursuant
to Section 21 of the Revenue Code of the City of Manila as amended for the year 2002 in the
following amounts:
To plaintiff SM Mart, Inc. - P 11,462,525.02

To plaintiff SM Prime Holdings, Inc. - 3,118,104.63

To plaintiff Star Appliances Center - 2,152,316.54

To plaintiff Supervalue, Inc. - 1,362,750.34

To plaintiff Ace Hardware Phils., Inc. - 419,689.04

To plaintiff Watsons Personal Care Health - 231,453.62

Stores Phils., Inc.

To plaintiff Jollimart Phils., Corp. - 140,908.54

To plaintiff Surplus Marketing Corp. - 220,204.70

To plaintiff Signature Mktg. Corp. - 94,906.34

TOTAL: - P 19,316,458.77

Defendants are further enjoined from collecting taxes under Section 21, Revenue Code of
Manila from herein plaintiff.

SO ORDERED.10

The parties did not inform the Court but based on the records, the above Decision had
already become final and executory per the Certificate of Finality11 issued by the same trial
court on October 20, 2008. In fact, a Writ of Execution12 was issued by the RTC on
November 25, 2009. In view of the foregoing, it clearly appears that the issues raised in the
present petition, which merely involve the incident on the preliminary injunction issued by the
RTC, have already become moot and academic considering that the trial court, in its decision
on the merits in the main case, has already ruled in favor of respondents and that the same
decision is now final and executory. Well entrenched is the rule that where the issues have
become moot and academic, there is no justiciable controversy, thereby rendering the
resolution of the same of no practical use or value.13

In any case, the Court finds it necessary to resolve the issue on jurisdiction raised by
petitioners owing to its significance and for future guidance of both bench and bar. It is a
settled principle that courts will decide a question otherwise moot and academic if it is
capable of repetition, yet evading review.14

However, before proceeding, to resolve the question on jurisdiction, the Court deems it
proper to likewise address a procedural error which petitioners committed.

Petitioners availed of the wrong remedy when they filed the instant special civil action for
certiorari under Rule 65 of the Rules of Court in assailing the Resolutions of the CA which
dismissed their petition filed with the said court and their motion for reconsideration of such
dismissal. There is no dispute that the assailed Resolutions of the CA are in the nature of a
final order as they disposed of the petition completely. It is settled that in cases where an
assailed judgment or order is considered final, the remedy of the aggrieved party is appeal.
Hence, in the instant case, petitioner should have filed a petition for review on certiorari
under Rule 45, which is a continuation of the appellate process over the original case.15

Petitioners should be reminded of the equally-settled rule that a special civil action for
certiorari under Rule 65 is an original or independent action based on grave abuse of
discretion amounting to lack or excess of jurisdiction and it will lie only if there is no appeal or
any other plain, speedy, and adequate remedy in the ordinary course of law.16 As such, it
cannot be a substitute for a lost appeal.17

Nonetheless, in accordance with the liberal spirit pervading the Rules of Court and in the
interest of substantial justice, this Court has, before, treated a petition for certiorari as a
petition for review on certiorari, particularly (1) if the petition for certiorari was filed within the
reglementary period within which to file a petition for review on certiorari; (2) when errors of
judgment are averred; and (3) when there is sufficient reason to justify the relaxation of the
rules.18 Considering that the present petition was filed within the 15-day reglementary period
for filing a petition for review on certiorari under Rule 45, that an error of judgment is averred,
and because of the significance of the issue on jurisdiction, the Court deems it proper and
justified to relax the rules and, thus, treat the instant petition for certiorari as a petition for
review on certiorari.

Having disposed of the procedural aspect, we now turn to the central issue in this case. The
basic question posed before this Court is whether or not the CTA has jurisdiction over a
special civil action for certiorari assailing an interlocutory order issued by the RTC in a local
tax case.

This Court rules in the affirmative.

On June 16, 1954, Congress enacted Republic Act No. 1125 (RA 1125) creating the CTA
and giving to the said court jurisdiction over the following:

(1) Decisions of the Collector of Internal Revenue in cases involving disputed


assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the Bureau of Internal
Revenue;

(2) Decisions of the Commissioner of Customs in cases involving liability for customs
duties, fees or other money charges; seizure, detention or release of property
affected fines, forfeitures or other penalties imposed in relation thereto; or other
matters arising under the Customs Law or other law or part of law administered by
the Bureau of Customs; and

(3) Decisions of provincial or City Boards of Assessment Appeals in cases involving


the assessment and taxation of real property or other matters arising under the
Assessment Law, including rules and regulations relative thereto.

On March 30, 2004, the Legislature passed into law Republic Act No. 9282 (RA 9282)
amending RA 1125 by expanding the jurisdiction of the CTA, enlarging its membership and
elevating its rank to the level of a collegiate court with special jurisdiction. Pertinent portions
of the amendatory act provides thus:

Sec. 7. Jurisdiction. - The CTA shall exercise:


a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving


disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving


disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relations thereto, or other matters arising under the
National Internal Revenue Code or other laws administered by the Bureau of
Internal Revenue, where the National Internal Revenue Code provides a
specific period of action, in which case the inaction shall be deemed a denial;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax


cases originally decided or resolved by them in the exercise of their original
or appellate jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for


customs duties, fees or other money charges, seizure, detention or release of
property affected, fines, forfeitures or other penalties in relation thereto, or
other matters arising under the Customs Law or other laws administered by
the Bureau of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of


its appellate jurisdiction over cases involving the assessment and taxation of
real property originally decided by the provincial or city board of assessment
appeals;

6. Decisions of the Secretary of Finance on customs cases elevated to him


automatically for review from decisions of the Commissioner of Customs
which are adverse to the Government under Section 2315 of the Tariff and
Customs Code;

7. Decisions of the Secretary of Trade and Industry, in the case of


nonagricultural product, commodity or article, and the Secretary of
Agriculture in the case of agricultural product, commodity or article, involving
dumping and countervailing duties under Section 301 and 302, respectively,
of the Tariff and Customs Code, and safeguard measures under Republic Act
No. 8800, where either party may appeal the decision to impose or not to
impose said duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:

1. Exclusive original jurisdiction over all criminal offenses arising from


violations of the National Internal Revenue Code or Tariff and Customs Code
and other laws administered by the Bureau of Internal Revenue or the
Bureau of Customs: Provided, however, That offenses or felonies mentioned
in this paragraph where the principal amount of taxes and fees, exclusive of
charges and penalties, claimed is less than One million pesos
(₱1,000,000.00) or where there is no specified amount claimed shall be tried
by the regular Courts and the jurisdiction of the CTA shall be appellate. Any
provision of law or the Rules of Court to the contrary notwithstanding, the
criminal action and the corresponding civil action for the recovery of civil
liability for taxes and penalties shall at all times be simultaneously instituted
with, and jointly determined in the same proceeding by the CTA, the filing of
the criminal action being deemed to necessarily carry with it the filing of the
civil action, and no right to reserve the filing of such civil action separately
from the criminal action will be recognized.

2. Exclusive appellate jurisdiction in criminal offenses:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax
cases originally decided by them, in their respected territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial
Courts in the exercise of their appellate jurisdiction over tax cases originally decided by the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their
respective jurisdiction.

c. Jurisdiction over tax collection cases as herein provided:

1. Exclusive original jurisdiction in tax collection cases involving final and


executory assessments for taxes, fees, charges and penalties: Provides,
however, that collection cases where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos
(₱1,000,000.00) shall be tried by the proper Municipal Trial Court,
Metropolitan Trial Court and Regional Trial Court.

2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax
collection cases originally decided by them, in their respective territorial jurisdiction.

b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial
Courts in the Exercise of their appellate jurisdiction over tax collection cases originally
decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial
Courts, in their respective jurisdiction.19

A perusal of the above provisions would show that, while it is clearly stated that the CTA has
exclusive appellate jurisdiction over decisions, orders or resolutions of the RTCs in local tax
cases originally decided or resolved by them in the exercise of their original or appellate
jurisdiction, there is no categorical statement under RA 1125 as well as the amendatory RA
9282, which provides that th e CTA has jurisdiction over petitions for certiorari assailing
interlocutory orders issued by the RTC in local tax cases filed before it.

The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of
original jurisdiction which must be expressly conferred by the Constitution or by law and
cannot be implied from the mere existence of appellate jurisdiction.20 Thus, in the cases of
Pimentel v. COMELEC,21 Garcia v. De Jesus,22 Veloria v. COMELEC,23Department of
Agrarian Reform Adjudication Board v. Lubrica,24 and Garcia v. Sandiganbayan,25 this Court
has ruled against the jurisdiction of courts or tribunals over petitions for certiorari on the
ground that there is no law which expressly gives these tribunals such power.26 It must be
observed, however, that with the exception of Garcia v. Sandiganbayan,27 these rulings
pertain not to regular courts but to tribunals exercising quasi-judicial powers. With respect to
the Sandiganbayan, Republic Act No. 824928 now provides that the special criminal court has
exclusive original jurisdiction over petitions for the issuance of the writs of mandamus,
prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and processes in
aid of its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the
Supreme Court, in the exercise of its original jurisdiction, to issue writs of certiorari,
prohibition and mandamus. With respect to the Court of Appeals, Section 9 (1) of Batas
Pambansa Blg. 129 (BP 129) gives the appellate court, also in the exercise of its original
jurisdiction, the power to issue, among others, a writ of certiorari,whether or not in aid of its
appellate jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in
the exercise of their original jurisdiction, is provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to
the CTA, Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial
power shall be vested in one Supreme Court and in such lower courts as may be established
by law and that judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the
power of the CTA includes that of determining whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax court.
It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue
writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must
have the authority to issue, among others, a writ of certiorari. In transferring exclusive
jurisdiction over appealed tax cases to the CTA, it can reasonably be assumed that the law
intended to transfer also such power as is deemed necessary, if not indispensable, in aid of
such appellate jurisdiction. There is no perceivable reason why the transfer should only be
considered as partial, not total.

Consistent with the above pronouncement, this Court has held as early as the case of J.M.
Tuason & Co., Inc. v. Jaramillo, et al.29 that "if a case may be appealed to a particular court or
judicial tribunal or body, then said court or judicial tribunal or body has jurisdiction to issue
the extraordinary writ of certiorari, in aid of its appellate jurisdiction."30 This principle was
affirmed in De Jesus v. Court of Appeals,31 where the Court stated that "a court may issue a
writ of certiorari in aid of its appellate jurisdiction if said court has jurisdiction to review, by
appeal or writ of error, the final orders or decisions of the lower court."32 The rulings in J.M.
Tuason and De Jesus were reiterated in the more recent cases of Galang, Jr. v.
Geronimo33 and Bulilis v. Nuez.34

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law,
jurisdiction is conferred on a court or judicial officer, all auxiliary writs, processes and other
means necessary to carry it into effect may be employed by such court or officer.
If this Court were to sustain petitioners' contention that jurisdiction over their certiorari
petition lies with the CA, this Court would be confirming the exercise by two judicial bodies,
the CA and the CTA, of jurisdiction over basically the same subject matter – precisely the
split-jurisdiction situation which is anathema to the orderly administration of justice.35 The
Court cannot accept that such was the legislative motive, especially considering that the law
expressly confers on the CTA, the tribunal with the specialized competence over tax and
tariff matters, the role of judicial review over local tax cases without mention of any other
court that may exercise such power. Thus, the Court agrees with the ruling of the CA that
since appellate jurisdiction over private respondents' complaint for tax refund is vested in the
CTA, it follows that a petition for certiorari seeking nullification of an interlocutory order
issued in the said case should, likewise, be filed with the same court. To rule otherwise
would lead to an absurd situation where one court decides an appeal in the main case while
another court rules on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence
to split jurisdiction to conclude that the intention of the law is to divide the authority over a
local tax case filed with the RTC by giving to the CA or this Court jurisdiction to issue a writ of
certiorari against interlocutory orders of the RTC but giving to the CTA the jurisdiction over
the appeal from the decision of the trial court in the same case. It is more in consonance with
logic and legal soundness to conclude that the grant of appellate jurisdiction to the CTA over
tax cases filed in and decided by the RTC carries with it the power to issue a writ of certiorari
when necessary in aid of such appellate jurisdiction. The supervisory power or jurisdiction of
the CTA to issue a writ of certiorari in aid of its appellate jurisdiction should co-exist with, and
be a complement to, its appellate jurisdiction to review, by appeal, the final orders and
decisions of the RTC, in order to have complete supervision over the acts of the latter.36

A grant of appellate jurisdiction implies that there is included in it the power necessary to
exercise it effectively, to make all orders that will preserve the subject of the action, and to
give effect to the final determination of the appeal. It carries with it the power to protect that
jurisdiction and to make the decisions of the court thereunder effective. The court, in aid of its
appellate jurisdiction, has authority to control all auxiliary and incidental matters necessary to
the efficient and proper exercise of that jurisdiction. For this purpose, it may, when
1âwphi1

necessary, prohibit or restrain the performance of any act which might interfere with the
proper exercise of its rightful jurisdiction in cases pending before it.37

Lastly, it would not be amiss to point out that a court which is endowed with a particular
jurisdiction should have powers which are necessary to enable it to act effectively within such
jurisdiction. These should be regarded as powers which are inherent in its jurisdiction and
the court must possess them in order to enforce its rules of practice and to suppress any
abuses of its process and to defeat any attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA
and shall possess all the inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a
general grant of jurisdiction, in addition to those expressly conferred on them. These inherent
powers are such powers as are necessary for the ordinary and efficient exercise of
jurisdiction; or are essential to the existence, dignity and functions of the courts, as well as to
the due administration of justice; or are directly appropriate, convenient and suitable to the
execution of their granted powers; and include the power to maintain the court's jurisdiction
and render it effective in behalf of the litigants.38
Thus, this Court has held that "while a court may be expressly granted the incidental powers
necessary to effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive
legislation, implies the necessary and usual incidental powers essential to effectuate it, and,
subject to existing laws and constitutional provisions, every regularly constituted court has
power to do all things that are reasonably necessary for the administration of justice within
the scope of its jurisdiction and for the enforcement of its judgments and mandates."39 Hence,
demands, matters or questions ancillary or incidental to, or growing out of, the main action,
and coming within the above principles, may be taken cognizance of by the court and
determined, since such jurisdiction is in aid of its authority over the principal matter, even
though the court may thus be called on to consider and decide matters which, as original
causes of action, would not be within its cognizance.40

Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the
CTA to take cognizance of petitions for certiorari questioning interlocutory orders issued by
the RTC in a local tax case is included in the powers granted by the Constitution as well as
inherent in the exercise of its appellate jurisdiction.

Finally, it would bear to point out that this Court is not abandoning the rule that, insofar as
quasi-judicial tribunals are concerned, the authority to issue writs of certiorari must still be
expressly conferred by the Constitution or by law and cannot be implied from the mere
existence of their appellate jurisdiction. This doctrine remains as it applies only to quasi-
judicial bodies.

WHEREFORE, the petition is DENIED.

SO ORDERED.
G.R. No. 184203 November 26, 2014

CITY OF LAPU-LAPU, Petitioner,


vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.

x-----------------------x

G.R. No. 187583

PROVINCE OF BATAAN, represented by GOVERNOR ENRIQUE T. GARCIA, JR., and


EMERLINDA S. TALENTO, in her capacity as Provincial Treasurer of
Bataan, Petitioners,
vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.

DECISION

LEONEN, J.:

The Philippine Economic Zone Authority is exempt from payment of real property taxes.

These are consolidated1 petitions for review on certiorari the City of Lapu-Lapu and the
Province of Bataan separately filed against the Philippine Economic Zone Authority (PEZA).

In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals’
decision2 dated January 11, 2008 and resolution3 dated August 6, 2008, dismissing the City’s
appeal for being the wrong mode of appeal. The City appealed the Regional Trial
Court,Branch 111, Pasay City’s decision finding the PEZA exempt from payment of real
property taxes.

In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals’
decision4 dated August 27, 2008 and resolution5 dated April 16, 2009, granting the PEZA’s
petition for certiorari. The Court of Appeals ruled that the Regional Trial Court, Branch 115,
Pasay City gravely abused its discretion in finding the PEZA liable for real property taxes to
the Province of Bataan.

Facts common to the consolidated petitions

In the exercise of his legislative powers,6 President Ferdinand E. Marcos issued Presidential
Decree No. 66 in 1972, declaring as government policy the establishment of export
processing zones in strategic locations in the Philippines. Presidential Decree No. 66 aimed
"to encourage and promote foreign commerce as a means of making the Philippines a center
of international trade, of strengthening our export trade and foreign exchange position, of
hastening industrialization,of reducing domestic unemployment, and of accelerating the
development of the country."7

To carry out this policy, the Export Processing Zone Authority (EPZA) was created to
operate, administer, and manage the export processing zones established in the Port of
Mariveles, Bataan8 and such other export processing zones that may be created by virtue of
the decree.9
The decree declared the EPZA non-profit in character10 with all its revenues devoted to its
development, improvement, and maintenance.11 To maintain this non-profit character, the
EPZA was declared exempt from all taxes that may be due to the Republic of the Philippines,
its provinces, cities, municipalities, and other government agencies and
instrumentalities.12 Specifically, Section 21 of Presidential Decree No. 66 declared the EPZA
exempt from payment of real property taxes:

Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall
be non-profit and shall devote and use all its returns from its capital investment, as well as
excess revenues from its operations, for the development, improvement and maintenance
and other related expenditures of the Authority to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section 1 of this Decree.
In consonance therewith, the Authority is hereby declared exempt:

....

(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and
licenses to be paid to the National Government, its provinces, cities, municipalities and other
government agenciesand instrumentalities[.]

In 1979, President Marcos issued Proclamation No. 1811, establishing the Mactan Export
Processing Zone. Certain parcels of land of the public domain located in the City of Lapu-
Lapuin Mactan, Cebu were reserved to serve as site of the Mactan Export Processing Zone.

In 1995, the PEZA was created by virtue of Republic Act No. 7916 or "the Special Economic
Zone Act of 1995"13 to operate, administer, manage, and develop economic zones in the
country.14 The PEZA was granted the power to register, regulate, and supervise the
enterprises located in the economic zones.15 By virtue of the law, the export processing zone
in Mariveles, Bataan became the Bataan Economic Zone16 and the Mactan Export
Processing Zone the Mactan Economic Zone.17

As for the EPZA, the law required it to "evolve into the PEZA in accordance with the
guidelines and regulations set forth in an executive order issued for [the] purpose."18

On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282, directing
the PEZA to assume and exercise all of the EPZA’s powers, functions, and responsibilities
"as provided in Presidential Decree No. 66, as amended, insofar as they are not inconsistent
with the powers, functions, and responsibilities of the PEZA, as mandated under [the Special
Economic Zone Act of 1995]."19 All of EPZA’s properties, equipment, and assets, among
others, were ordered transferred to the PEZA.20

Facts of G.R. No. 184203

In the letter21 dated March 25, 1998, the City of Lapu-Lapu, through the Office of the
Treasurer, demanded from the PEZA 32,912,350.08 in real property taxes for the period
from 1992 to 1998 on the PEZA’s properties located in the Mactan Economic Zone.

The City reiterated its demand in the letter22 dated May 21, 1998. It cited Sections 193 and
234 of the Local Government Code of 1991 that withdrew the real property tax exemptions
previously granted to or presently enjoyed by all persons. The City pointed out that no
provision in the Special Economic Zone Act of 1995 specifically exempted the PEZA from
payment of real property taxes, unlike Section 21 of Presidential Decree No. 66 that explicitly
provided for EPZA’s exemption. Since no legal provision explicitly exempted the PEZA from
payment of real property taxes, the City argued that it can tax the PEZA.

The City made subsequent demands23 on the PEZA. In its last reminder24 dated May 13,
2002, the City assessed the PEZA 86,843,503.48 as real property taxes for the period from
1992 to 2002.

On September 11, 2002, the PEZAfiled a petition for declaratory Relief25 with the Regional
Trial Court of Pasay City, praying that the trial court declare it exempt from payment ofreal
property taxes. The case was raffled to Branch 111.

The City answered26 the petition, maintaining that the PEZA is liable for real property taxes.
To support its argument, the City cited a legal opinion dated September 6, 1999 issued by
the Department of Justice,27 which stated that the PEZA is not exempt from payment of real
property taxes. The Department of Justice based its opinion on Sections 193 and 234 of the
Local Government Code that withdrew the tax exemptions, including real property tax
exemptions, previously granted to all persons.

A reply28 was filed by the PEZA to which the City filed a rejoinder.29

Pursuant to Rule 63, Section 3 of Rules of Court,30 the Office of the Solicitor General filed a
comment31 on the PEZA’s petition for declaratory relief. It agreed that the PEZA is exempt
from payment of real property taxes, citing Sections 24 and 51 of the Special Economic Zone
Act of 1995.

The trial court agreed with the Solicitor General. Section 24 of the Special Economic Zone
Act of 1995 provides:

SEC. 24. Exemption from National and Local Taxes. – Except for real property taxes on land
owned by developers, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross
income earned by all business enterprises within the ECOZONE shall be paid and remitted
as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments
to the treasurer’s office of the municipality or city where the enterprise is located.

Section 51 of the law, on the other hand, provides:

SEC. 51. Ipso-Facto Clause. – All privileges, benefits, advantages or exemptions granted to
special economic zones under Republic Act No. 7227, shall ipso-facto be accorded to
special economic zones already created or to be created under this Act. The free port status
shall not be vested upon new special economic zones.

Based on Section 51, the trial court held that all privileges, benefits, advantages, or
exemptions granted tospecial economic zones created under the Bases Conversion and
Development Act of 1992 apply to special economic zones created under the Special
Economic ZoneAct of 1995.
Since these benefits include exemption from payment of national or local taxes, these
benefits apply to special economic zones owned by the PEZA.

According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of the
Special Economic Zone Act of 1995. It ruled that Section 24, which taxes real property
owned by developers of economic zones, only applies to private developers of economic
zones, not to public developers like the PEZA. The PEZA, therefore, is not liable for real
property taxes on the land it owns.

Characterizing the PEZA as an agency of the National Government, the trial court ruled that
the City had no authority to tax the PEZA under Sections 133(o) and 234(a) of the Local
Government Code of 1991.

In the resolution32 dated June 14, 2006, the trial court granted the PEZA’s petition for
declaratory relief and declared it exempt from payment of real property taxes.

The City filed a motion for reconsideration,33 which the trial court denied in its
resolution34 dated September 26, 2006.

The City then appealed35 to the Court of Appeals.

The Court of Appeals noted the following issues the City raised in its appellant’s brief: (1)
whether the trial court had jurisdiction over the PEZA’s petition for declaratory relief; (2)
whether the PEZA is a government agency performing governmental functions; and (3)
whether the PEZA is exempt from payment of real property taxes.

The issues presented by the City, according to the Court of Appeals, are pure questions of
law which should have been raised in a petition for review on certiorari directly filed before
this court. Since the City availed itself of the wrong mode of appeal, the Court of Appeals
dismissed the City’s appeal in the decision36 dated January 11, 2008.

The City filed a motion for extension of time to file a motion for reconsideration,37 which the
Court of Appeals denied in the resolution38 dated April 11, 2008.

Despite the denial of its motion for extension, the City filed a motion for reconsideration.39 In
the resolution40 dated August 6, 2008, the Court of Appeals denied that motion.

In its petition for review on certiorari with this court,41 the City argues that the Court of
Appeals "hid under the skirts of technical rules"42 in resolving its appeal. The City maintains
that its appeal involved mixed questions of fact and law. According to the City, whether the
PEZA performed governmental functions "cannot completely be addressed by law but [by]
the factual and actual activities [the PEZA is] carrying out."43

Even assuming that the petition involves pure questions of law, the City contends that the
subject matter of the case "is of extreme importance with [far-reaching] consequence that [its
magnitude] would surely shape and determine the course ofour nation’s future."44 The Court
of Appeals, the City argues, should have resolved the case on the merits.

The City insists that the trial court had no jurisdiction to hear the PEZA’s petition for
declaratory relief. According to the City, the case involves real property located in the City of
Lapu-Lapu. The petition for declaratory relief should have been filed before the Regional
Trial Court of the City of Lapu-Lapu.45

Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite allegedly
demanded real property taxes from the PEZA. The City argues that the PEZA should have
likewise impleaded these local government units as respondents in its petition for declaratory
relief. For its failure to do so, the PEZA violated Rule 63, Section 2 of the Rules of Court, and
the trial court should have dismissed the petition.46

This court ordered the PEZA to comment on the City’s petition for review on certiorari.47

At the outset of its comment, the PEZA argues that the Court of Appeals’ decision dated
January 11, 2008 had become final and executory. After the Court of Appeals had denied the
City’s appeal, the City filed a motion for extension of time to file a motion for reconsideration.
Arguing that the time to file a motion for reconsideration is not extendible, the PEZA filed its
motion for reconsideration out of time. The Cityhas no more right to appeal to this court.48

The PEZA maintains that the City availed itself of the wrong mode of appeal before the Court
of Appeals. Since the City raised pure questions of law in its appeal, the PEZA argues that
the proper remedy is a petition for review on certiorari with this court, not an ordinary appeal
before the appellate court. The Court of Appeals, therefore, correctly dismissed outright the
City’s appeal under Rule 50, Section 2 of the Rules of Court.49

On the merits, the PEZA argues that it is an agency and instrumentality of the National
Government. It is therefore exempt from payment of real property taxes under Sections
133(o) and 234(a) of the Local Government Code.50 It adds that the tax privileges under
Sections 24 and 51 of the Special Economic Zone Act of 1995 applied to it.51

Considering that the site of the Mactan Economic Zoneis a reserved land under
Proclamation No. 1811, the PEZA claims that the properties sought to be taxed are lands of
public dominion exempt from real property taxes.52

As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had
jurisdiction to hear its petition for declaratory relief under Rule 63, Section 1 of the Rules of
Court.[53]] It also argued that it need not implead the Province of Bataan, the City of Baguio,
and the Province of Cavite as respondents considering that their demands came after the
PEZA had already filed the petition in court.54

Facts of G.R. No. 187583

After the City of Lapu-Lapu had demanded payment of real property taxes from the PEZA,
the Province of Bataan followed suit. In its letter55 dated May 29, 2003, the Province, through
the Office of the Provincial Treasurer, informed the PEZA that it would be sending a real
property tax billing to the PEZA. Arguing that the PEZA is a developer of economic zones,
the Province claimed that the PEZA is liable for real property taxes under Section 24 of the
Special Economic Zone Act of 1995.

In its reply letter56 dated June 18, 2003, the PEZA requested the Province to suspend the
service of the real property tax billing. It cited its petition for declaratory relief against the City
of Lapu-Lapu pending before the Regional Trial Court, Branch 111, Pasay City as basis.
The Province argued that serving a real property tax billing on the PEZA "would not in any
way affect [its] petition for declaratory relief before [the Regional Trial Court] of Pasay
City."57 Thus, in its letter58 dated June 27, 2003, the Province notified the PEZAof its real
property tax liabilities for June 1, 1995 to December 31, 2002 totalling ₱110,549,032.55.

After having been served a tax billing, the PEZA again requested the Province to suspend
collecting its alleged real property tax liabilities until the Regional Trial Court of Pasay
Cityresolves its petition for declaratory relief.59

The Province ignored the PEZA’s request. On January 20, 2004, the Province served on the
PEZA a statement of unpaid real property tax for the period from June 1995 to December
2004.60

The PEZA again requested the Province to suspend collecting its alleged real property
taxes.61 The Province denied the request in its letter62 dated January 29, 2004, then servedon
the PEZA a warrant of levy63 covering the PEZA’s real properties located in Mariveles,
Bataan.

The PEZA’s subsequent requests64 for suspension of collection were all denied by the
Province.65 The Province then served on the PEZA a notice of delinquency in the payment of
real property taxes66 and a notice of sale of real property for unpaid real property tax.67 The
Province finally sent the PEZA a notice of public auction of the latter’s properties in
Mariveles, Bataan.68

On June 14, 2004, the PEZA filed a petition for injunction69 with prayer for issuance of a
temporary restraining order and/or writ of preliminary injunction before the Regional Trial
Court of Pasay City, arguing that it is exempt from payment ofreal property taxes. It added
that the notice of sale issued by the Province was void because it was not published in a
newspaper ofgeneral circulation asrequired by Section 260 of the Local Government Code.70

The case was raffled to Branch 115.

In its order71 dated June 18, 2004, the trial court issued a temporary restraining order against
the Province. After the PEZA had filed a ₱100,000.00 bond,72 the trial court issued a writ of
preliminary injunction,73 enjoining the Province from selling the PEZA’s real properties at
public auction.

On March 3, 2006, the PEZA and Province both manifested that each would file a
memorandum after which the case would be deemed submitted for decision. The parties
then filed their respective memoranda.74

In the order75 dated January 31, 2007, the trial court denied the PEZA’s petition for injunction.
The trial court ruled that the PEZA is not exempt from payment of real property taxes.
According to the trial court, Sections 193 and 234 of the Local Government Code had
withdrawn the real property tax exemptions previously granted to all persons, whether
natural or juridical.76 As to the tax exemptions under Section 51 of the Special Economic
Zone Act of 1995, the trial court ruled that the provision only applies to businesses operating
within the economic zones, not to the PEZA.77

The PEZA filed before the Court of Appeals a petition for certiorari78 with prayer for issuance
of a temporary restraining order.
The Court of Appeals issued a temporary restraining order, enjoining the Province and its
Provincial Treasurer from selling PEZA's properties at public auction scheduled on October
17, 2007.79 It also ordered the Province to comment on the PEZA’s petition.

In its comment,80 the Province alleged that it received a copy of the temporary restraining
order only on October 18, 2007 when it had already sold the PEZA’s properties at public
auction. Arguing that the act sought to be enjoined was already fait accompli, the Province
prayed for the dismissal of the petition for certiorari.

The PEZA then filed a supplemental petition for certiorari, prohibition, and
mandamus81 against the Province, arguing that the Provincial Treasurer of Bataan acted with
grave abuse of discretion in issuing the notice of delinquency and notice of sale. It
maintained that it is exempt from payment of real property taxes because it is a government
instrumentality. It added that its lands are property of public dominion which cannot be sold
at public auction.

The PEZA also filed a motion82 for issuance of an order affirming the temporary restraining
order and a writ of preliminary injunction to enjoin the Province from consolidating title over
the PEZA’s properties.

In its resolution83 dated January 16, 2008,the Court of Appeals admitted the supplemental
petition for certiorari, prohibition, and mandamus. It required the Province to comment on the
supplemental petition and to file a memorandum on the PEZA’s prayer for issuance of
temporary restraining order.

The Province commented84 on the PEZA’s supplemental petition, to which the PEZA replied.85

The Province then filed a motion86 for leave to admit attached rejoinder with motion to
dismiss. In the rejoinder with motion to dismiss,87 the Province argued for the first time that
the Court of Appeals had no jurisdiction over the subject matter of the action.

According to the Province, the PEZA erred in filing a petition for certiorari. Arguing that the
PEZA sought to reverse a Regional Trial Court decision in a local tax case, the Province
claimed that the court with appellate jurisdiction over the action is the Court of Tax Appeals.
The PEZA then prayed that the Court of Appeals dismiss the petition for certiorari for lack of
jurisdiction over the subject matter of the action.

The Court of Appeals held that the issue before it was whether the trial court judge gravely
abused his discretion in dismissing the PEZA’s petition for prohibition. This issue, according
to the Court of Appeals, is properly addressed in a petition for certiorari over which it has
jurisdiction to resolve. It, therefore, maintained jurisdiction to resolve the PEZA’s petition for
certiorari.88

Although it admitted that appeal, not certiorari, was the PEZA’s proper remedy to reverse the
trial court’s decision,89the Court of Appeals proceeded to decide the petition for certiorari in
"the broader interest of justice."90

The Court of Appeals ruled that the trial court judge gravely abused his discretion in
dismissing the PEZA’s petition for prohibition. It held that Section 21 of Presidential Decree
No. 66 and Section 51 of the Special Economic Zone Act of 1995 granted the PEZA
exemption from payment of real property taxes.91 Based on the criteria set in Manila
International Airport Authority v. Court of Appeals,92 the Court of Appeals found that the
PEZA is an instrumentality of the national government. No taxes, therefore, could be levied
on it by local government units.93

In the decision94 dated August 27, 2008, the Court of Appeals granted the PEZA’s petition for
certiorari. It set aside the trial court’s decision and nullified all the Province’s proceedings
with respect to the collection of real property taxes from the PEZA.

The Province filed a motion for reconsideration,95 which the Court of Appeals denied in the
resolution96 dated April 16, 2009 for lack of merit.

In its petition for review on certiorari with this court,97 the Province of Bataan insists that the
Court of Appeals had no jurisdiction to take cognizance of the PEZA’s petition for certiorari.
The Province maintains that the Court of Tax Appeals had jurisdiction to hear the PEZA’s
petition since it involved a local tax case decided by a Regional Trial Court.98

The Province reiterates that the PEZA is not exempt from payment of real property taxes.
The Province points out that the EPZA, the PEZA’s predecessor, had to be categorically
exempted from payment of real property taxes. The EPZA, therefore, was not inherently
exempt from payment of real property taxes and so is the PEZA. Since Congress omitted
from the Special Economic Zone Act of 1995 a provision specifically exempting the PEZA
from payment of real property taxes, the Province argues that the PEZA is a taxable entity. It
cited the rule in statutory construction that provisions omitted in revised statutes are deemed
repealed.99

With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting tax
exemptions and benefits, the Province argues that these provisions only apply to business
establishments operating within special economic zones,100 not to the PEZA.

This court ordered the PEZA tocomment on the Province’s petition for review on
certiorari.101 In its comment,102 the PEZA argues that the Court of Appeals had jurisdiction to
hear its petition for certiorari since the issue was whether the trial court committed grave
abuse of discretion in denying its petition for injunction. The PEZA maintains thatit is exempt
from payment of real property taxes under Section 21 of Presidential Decree No. 66 and
Section 51 of the Special Economic Zone Act of 1995.

The Province filed its reply,103 reiterating its arguments in its petition for review on certiorari.
On the PEZA’s motion,104 this court consolidated the petitions filed by the City of Lapu-Lapu
and the Province of Bataan.105

The issues for our resolution are the following:

I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapu’s appeal
for raising pure questions of law;

II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear,
try, and decide the City of Lapu-Lapu’s petition for declaratory relief;

III. Whether the petition for injunction filed before the Regional Trial Court, Branch
115, Pasay City, is a local tax case appealable to the Court of Tax Appeals; and

IV. Whether the PEZA is exempt from payment of real property taxes.
We deny the consolidated petitions.

I.

The Court of Appeals did not err in


dismissing the City of Lapu-Lapu’s
appeal for raising pure questions of law

Under the Rules of Court, there are three modes of appeal from Regional Trial Court
decisions. The first mode is through an ordinary appeal before the Court of Appeals where
the decision assailed was rendered in the exercise of the Regional Trial Court’s original
jurisdiction. Ordinary appeals are governed by Rule 41, Sections 3 to 13 of the Rules of
Court. In ordinary appeals, questions of fact or mixed questions of fact and law may be
raised.106

The second mode is through a petition for review before the Court of Appeals where the
decision assailed was rendered by the Regional Trial Court in the exercise of its appellate
jurisdiction. Rule 42 of the Rules of Court governs petitions for review before the Court of
Appeals. In petitions for review under Rule 42, questions of fact, of law, or mixed questions
of fact and law may be raised.107

The third mode is through an appealby certiorari before this court under Rule 45 where only
questions of law shall be raised.108

A question of fact exists when there is doubt as to the truth or falsity of the alleged
facts.109 On the other hand, there is a question of law if the appeal raises doubt as to the
applicable law on a certain set of facts.110

Under Rule 50, Section 2, an improper appeal before the Court of Appeals is dismissed
outright and shall not be referred to the proper court:

SEC. 2. Dismissal of improper appeal to the Court of Appeals. – An appeal under Rule 41
taken from the Regional Trial Court to the Court of Appeals raising only questions of law
shall be dismissed, issues purely of law not being reviewable by said court. Similarly, an
appeal by notice of appeal instead of by petition for review from the appellate judgment of a
Regional Trial Court shall be dismissed.

An appeal erroneously taken to the Court of Appeals shall not be transferred to the
appropriate court but shall be dismissed outright.

Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964 Rules of Court, which provided
that improper appeals to the Court of Appeals shall not be dismissed but shall be certified to
the proper court for resolution:

Sec. 3. Where appealed case erroneously, brought. — Where the appealed case has been
erroneously brought to the Court of Appeals, it shall not dismiss the appeal, but shall certify
the case to the proper court, with a specific and clear statement of the grounds therefor.

With respect to appeals by certiorari directly filed before this court but which raise questions
of fact, paragraph 4(b) of Circular No. 2-90 dated March 9, 1990 states that this court
"retains the option, in the exercise of its sound discretion and considering the attendant
circumstances, either itself to take cognizance of and decide such issues or to refer them to
the Court of Appeals for determination." In Indoyon, Jr. v. Court of Appeals,111 we said that
this court "cannot tolerate ignorance of the law on appeals."112 It is not this court’s task to
determine for litigants their proper remedies under the Rules.113

We agree that the City availed itself of the wrong mode of appeal before the Court of
Appeals. The City raised pure questions of law in its appeal. The issue of whether the
Regional Trial Court of Pasay had jurisdiction over the PEZA’s petition for declaratory relief is
a question of law, jurisdiction being a matter of law.114 The issue of whether the PEZA is a
government instrumentality exempt from payment of real property taxes is likewise a
question of law since this question is resolved by examining the provisions of the PEZA’s
charter as well as other laws relating to the PEZA.115

The Court of Appeals, therefore, did not err in dismissing the City’s appeal pursuant to Rule
50, Section 2 of the Rules of Court.

Nevertheless, considering the important questions involved in this case, we take cognizance
of the City’s petition for review on certiorari in the interest of justice.

In Municipality of Pateros v. The Honorable Court of Appeals,116 the Municipality of Pateros


filed an appeal under Rule 42 before the Court of Appeals, which the Court of Appeals
denied outright for raising pure questions of law. This court agreed that the Municipality of
Pateros "committed a procedural infraction"117 and should have directly filed a petition for
review on certiorari before this court. Nevertheless, "in the interest of justice and in order to
write finisto [the] controversy,"118 this court "opt[ed] to relax the rules"119 and proceeded to
decide the case. This court said:

While it is true that rules of procedure are intended to promote rather than frustrate the ends
of justice, and while the swift unclogging of the dockets of the courts is a laudable objective,
it nevertheless must not be met at the expense of substantial justice.

The Court has allowed some meritorious cases to proceed despite inherent procedural
defects and lapses. Thisis in keeping with the principle that rules of procedure are mere tools
designed to facilitate the attainment of justice, and that strict and rigid application ofrules
which should result in technicalities that tend to frustrate rather than promote substantial
justice must always be avoided. It is a far better and more prudent cause of action for the
court to excuse a technical lapse and afford the parties a review of the case to attain the
ends of justice, rather than dispose of the case on technicality and cause grave injustice to
the parties, giving a false impression of speedy disposal of cases while actually resulting in
more delay, if not a miscarriage of justice.120

Similar to Municipality of Pateros, we opt to relax the rules in this case. The PEZA operates
or otherwise administers special economic zones all over the country. Resolving the
substantive issue of whether the PEZA is taxable for real property taxes will clarify the taxing
powers of all local government units where special economic zones are operated. This case,
therefore, should be decided on the merits.

II.

The Regional Trial Court of Pasay had no


jurisdiction to hear, try, and decide the
PEZA’s petition for declaratory relief
against the City of Lapu-Lapu

Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63
provides:

SECTION 1. Who may file petition. – Any person interested under a deed, will, contract or
other written instrument, or whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach or violation,
thereof, bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties, thereunder.

An action for reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought
under this Rule.

The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court, the
subject matter of litigation in an action for declaratory relief being incapable of pecuniary
estimation.121 Section 19 of the Judiciary Reorganization Act of 1980 provides:

SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original
jurisdiction:

(1) In all civil actions in which the subject of litigation is incapable of pecuniary estimation[.]

Consistent with the law, the Rules state that a petition for declaratory relief is filed "in the
appropriate Regional Trial Court."122

A special civil action for declaratory relief is filed for a judicial determination of any question
of construction or validity arising from, and for a declaration of rights and duties, under any of
the following subject matters: a deed, will, contract or other written instrument, statute,
executive order or regulation, ordinance, orany other governmental regulation.123 However, a
declaratory judgment may issue only if there has been "no breach of the documents in
question."124 If the contract or statute subject matter of the action has already been breached,
the appropriate ordinary civil action must be filed.125 If adequate relief is available through
another form of action or proceeding, the other action must be preferred over an action for
declaratory relief.126

In Ollada v. Central Bank of the Philippines,127 the Central Bank issued CB-IED Form No. 5
requiring certified public accountants to submit an accreditation under oath before they were
allowed to certify financial statements submitted to the bank. Among those financial
statements the Central Bank disallowed were those certified by accountant Felipe B.
Ollada.128 Claiming that the requirement "restrained the legitimate pursuit of one’s trade,"129

Ollada filed a petition for declaratory relief against the Central Bank.

This court ordered the dismissal of Ollada’s petition "without prejudice to [his] seeking relief
in another appropriate action."130 According to this court, Ollada’s right had already been
violated when the Central Bank refused to accept the financial statements he prepared.
Since there was already a breach, a petition for declaratory relief was not proper. Ollada
must pursue the "appropriate ordinary civil action or proceeding."131 This court explained:
Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief
under the provisions of Rule 66 of the Rules of Court. On the question of when a special civil
action of this nature would prosper, we have already held that the complaint for declaratory
relief will not prosper if filed after a contract, statute or right has been breached or violated. In
the present case such is precisely the situation arising from the facts alleged in the petition
for declaratory relief. As vigorously claimed by petitioner himself, respondent had already
invaded or violated his right and caused him injury — all these giving him a complete cause
of action enforceable in an appropriate ordinary civil action or proceeding. The dismissal of
the action was, therefore, proper in the lightof our ruling in De Borja vs. Villadolid, 47 O.G. (5)
p. 2315, and Samson vs. Andal, G.R. No. L-3439, July 31, 1951, where we held that an
action for declaratory relief should be filed before there has been a breach of a contract,
statutes or right, and that it is sufficient tobar such action, that there had been a breach —
which would constitute actionable violation. The rule is that an action for Declaratory Relief is
proper only if adequate relief is not available through the means of other existing forms of
action or proceeding (1 C.J.S. 1027-1028).132

It is also required that the parties to the action for declaratory relief be those whose rights or
interests are affected by the contract or statute in question.133 "There must be an actual
justiciable controversy or the ‘ripening seeds’ of one"134 between the parties. The issue
between the parties "must be ripe for judicial determination."135 An action for declaratory relief
based on theoreticalor hypothetical questions cannot be filed for our courts are not advisory
courts.136

In Republic v. Roque,137 this court dismissed respondents’ petition for declaratory relief for
lack of justiciable controversy. According to this court, "[the respondents’] fear of prospective
prosecution [under the Human Security Act] was solely based on remarks of certain
government officials which were addressed to the general public."138

In Velarde v. Social Justice Society,139 this court refused to resolve the issue of "whether or
not [a religious leader’s endorsement] of a candidate for elective office or in urging or
requiring the members of his flock to vote for a specific candidate is violative [of the
separation clause]."140 According to the court, there was no justiciable controversy and
ordered the dismissal of the Social Justice Society’s petition for declaratory relief. This court
explained: Indeed, SJS merely speculated or anticipated without factual moorings that, as
religious leaders, the petitioner and his co-respondents below had endorsed or threatened to
endorse a candidate or candidates for elective offices; and that such actual or threatened
endorsement "will enable [them] to elect men to public office who [would] in turn be forever
beholden to their leaders, enabling them to control the government"[;] and "pos[ing] a clear
and present danger ofserious erosion of the people’s faith in the electoral process[;] and
reinforc[ing] their belief that religious leaders determine the ultimate result of elections,"
which would then be violative of the separation clause.

Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does
not suffice to constitute a justiciable controversy. The Petition does not even allege any
indication or manifest intent on the part of any of the respondents below to champion an
electoral candidate, or to urge their so-called flock to vote for, or not to vote for, a particular
candidate. It is a time-honored rule that sheer speculation does not give rise to an actionable
right.

Obviously, there is no factual allegation that SJS’ rights are being subjected to any
threatened, imminent and inevitable violation that should be prevented by the declaratory
relief sought. The judicial power and duty of the courts to settle actual controversies involving
rights that are legally demandable and enforceable cannot be exercised when there is no
actual or threatened violation of a legal right.

All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9
hereof be resolved." In other words, it merely sought an opinion of the trial court on whether
the speculated acts of religious leaders endorsing elective candidates for political offices
violated the constitutional principle on the separation of church and state. SJS did not ask for
a declaration of its rights and duties; neither did it pray for the stoppage of any threatened
violation of its declared rights. Courts, however, are proscribed from rendering an advisory
opinion.141 In sum, a petition for declaratory relief must satisfy six requisites:

[F]irst, the subject matter of the controversy must be a deed, will, contract or other written
instrument, statute, executive order or regulation, or ordinance; second, the terms of said
documents and the validity thereof are doubtful and require judicial construction; third, there
must have been no breach of the documents in question; fourth, there must be an actual
justiciable controversy or the "ripening seeds" of one between persons whose interests are
adverse; fifth, the issue must be ripe for judicial determination; and sixth, adequate relief is
not available through other means or other forms of action or proceeding.142 (Emphases
omitted)

We rule that the PEZA erred in availing itself of a petition for declaratory relief against the
City. The City had already issued demand letters and real property tax assessment against
the PEZA, in violation of the PEZA’s alleged tax-exempt status under its charter. The Special
Economic Zone Act of 1995, the subject matter of PEZA’s petition for declaratory relief, had
already been breached. The trial court, therefore, had no jurisdiction over the petition for
declaratory relief. There are several aspects of jurisdiction.143 Jurisdiction over the subject
matter is "the power to hear and determine cases of the general class to which the
proceedings in question belong."144 It is conferred by law, which may either be the
Constitution or a statute.145 Jurisdiction over the subject matter means "the nature of the
cause of action and the relief sought."146 Thus, the cause of action and character of the relief
sought as alleged in the complaint are examinedto determine whether a court had jurisdiction
over the subject matter.147 Any decision rendered by a court without jurisdiction over the
subjectmatter of the action is void.148

Another aspect of jurisdiction is jurisdiction over the person. It is "the power of [a] court to
render a personal judgment or to subject the parties in a particular action to the judgment
and other rulings rendered in the action."149A court automatically acquires jurisdiction over the
person of the plaintiff upon the filing of the initiatory pleading.150With respect to the defendant,
voluntary appearance in court or a valid service of summons vests the court with jurisdiction
over the defendant’s person.151 Jurisdiction over the person of the defendant is indispensable
in actions in personamor those actions based on a party’s personal liability.152 The
proceedings in an action in personamare void if the court had no jurisdiction over the person
of the defendant.153

Jurisdiction over the resor the thing under litigation is acquired either "by the seizure of the
property under legal process, whereby it is brought into actual custody of the law; or asa
result of the institution of legal proceedings, in which the power of the court is recognized
and made effective."154 Jurisdiction over the res is necessary in actions in remor those actions
"directed against the thing or property or status of a person and seek judgments with respect
thereto as against the whole world."155 The proceedings in an action in rem are void if the
court had no jurisdiction over the thing under litigation.156
In the present case, the Regional Trial Court had no jurisdiction over the subject matter of
the action, specifically, over the remedy sought. As this court explained in Malana v.
Tappa:157

. . . an action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of rights arising thereunder. Since the purpose of an action for
declaratory relief is to secure an authoritative statement of the rights and obligations of the
parties under a statute, deed, or contract for their guidance in the enforcement thereof, or
compliance therewith, and not to settle issues arising from an alleged breach thereof, it may
be entertained only before the breach or violation of the statute, deed, or contract to which it
refers. A petition for declaratory relief gives a practical remedy for ending controversies that
have not reached the state where another relief is immediately available; and supplies the
need for a form of action that will set controversies at rest before they lead to a repudiation of
obligations, an invasion of rights, and a commission of wrongs.

Where the law or contract has already been contravened prior to the filing of an action for
declaratory relief, the courts can no longer assume jurisdiction over the action. In other
words, a court has no more jurisdiction over an action for declaratory relief if its subject has
already been infringed or transgressed before the institution of the action.158 (Emphasis
supplied)

The trial court should have dismissed the PEZA’s petition for declaratory relief for lack of
jurisdiction.

Once an assessment has already been issued by the assessor, the proper remedy of a
taxpayer depends on whether the assessment was erroneous or illegal.

An erroneous assessment "presupposes that the taxpayer is subject to the tax but is
disputing the correctness of the amount assessed."159 With an erroneous assessment, the
taxpayer claims that the local assessor erred in determining any of the items for computing
the real property tax, i.e., the value of the real property or the portion thereof subject to tax
and the proper assessment levels. In case of an erroneous assessment, the taxpayer must
exhaust the administrative remedies provided under the Local Government Code before
resorting to judicial action.

The taxpayer must first pay the realproperty tax under protest. Section 252 of the Local
Government Code provides:

SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the
taxpayer first paysthe tax. There shall be annotated on the tax receipts the words "paid
under protest". The protest in writing must be filed within thirty (30) days from payment of the
tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality within
Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.

(b) The tax or a portion thereof paidunder protest, shall be held in trust by the
treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount
or portion of the tax protested shall be refunded to the protestant, or applied as tax
credit against his existing or future tax liability.
(d) In the event that the protest is denied or upon the lapse of the sixty day period
prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided
for in Chapter 3, Title II, Book II of this Code.

Should the taxpayer find the action on the protest unsatisfactory, the taxpayer may appeal
with the Local Board of Assessment Appeals within 60 days from receipt of the decision on
the protest:

SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal
interest in the property who is not satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within sixty (60) days from the date of
receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of
the provincial or city by filing a petition under oath in the form prescribed for the purpose,
together with copies of the tax declarations and such affidavits or documents submitted in
support of the appeal.

Payment under protest and appeal to the Local Board of Assessment Appeals are
"successive administrative remedies to a taxpayer who questions the correctness of an
assessment."160 The Local Board Assessment Appeals shall not entertain an appeal "without
the action of the local assessor"161 on the protest.

If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment
Appeals, the taxpayer may appeal with the Central Board of Assessment Appeals within 30
days from receipt of the Local Board’s decision:

SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall
decide the appeal within one hundred twenty (120) days from the date of receipt of such
appeal. The Board, after hearing, shall render its decision based on substantial evidence or
such relevant evidence on record as a reasonable mind might accept as adequate to support
the conclusion. (b) In the exercise ofits appellate jurisdiction, the Board shall have the power
to summon witnesses, administer oaths, conduct ocular inspection, take depositions, and
issue subpoena and subpoena duces tecum. The proceedings of the Board shall be
conducted solely for the purpose of ascertaining the facts without necessarily adhering to
technical rules applicable in judicial proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person having
legal interest therein and the provincial or city assessor with a copy of the decision of the
Board. In case the provincial or city assessor concurs in the revision or the assessment, it
shall be his duty to notify the owner of the property or the person having legal interest therein
of such factusing the form prescribed for the purpose. The owner of the property or the
person having legal interest therein or the assessor who is not satisfied with the decision of
the Board, may, within thirty (30) days after receipt of the decision of said Board, appeal to
the Central Board of Assessment Appeals, as herein provided. The decision of the Central
Board shall be final and executory. (Emphasis supplied)

On the other hand, an assessment is illegal if it was made without authority under the
law.162 In case of an illegal assessment, the taxpayer may directly resort to judicial action
without paying under protest the assessed tax and filing an appeal with the Local and Central
Board of Assessment Appeals.

In Ty v. Trampe,163 the Municipal Assessor of Pasig sent Alejandro B. Ty a notice of


assessment with respect to Ty’s real properties in Pasig. Without resorting to the
administrative remedies under the Local Government Code, Ty filed before the Regional
Trial Court a petition, praying that the trial court nullify the notice of assessment. In assessing
the real property taxes due, the Municipal Assessor used a schedule of market values solely
prepared by him. This, Ty argued, was void for being contrary to the Local Government Code
requiring that the schedule of market values be jointly prepared by the provincial, city, and
municipal assessors of the municipalities within the Metropolitan Manila Area.

This court ruled that the assessmentwas illegal for having been issued without authority of
the Municipal Assessor. Reconciling provisions of the Real Property Tax Code and the Local
Government Code, this court held that the schedule of market valuesmust be jointly prepared
by the provincial, city, and municipal assessors of the municipalities within the Metropolitan
Manila Area.

As to the issue of exhaustion of administrative remedies, this court held that Ty did not err in
directly resorting to judicial action. According to this court, payment under protest is required
only "where there is a question as to the reasonableness of the amount assessed."164 As to
appeals before the Local and Central Board of Assessment Appeals, they are "fruitful only
where questions of fact are involved."165

Ty raised the issue of the legality of the notice of assessment, an issue that did not go into
the reasonableness of the amount assessed. Neither did the issue involve a question of fact.
Ty raised a question of law and, therefore, need not resort to the administrative remedies
provided under the Local Government Code.

In the present case, the PEZA did not avail itself of any of the remedies against a notice of
assessment. A petition for declaratory relief is not the proper remedy once a notice of
assessment was already issued.

Instead of a petition for declaratory relief, the PEZA should have directly resorted to a judicial
action. The PEZA should have filed a complaint for injunction, the "appropriate ordinary civil
action"166 to enjoin the City from enforcing its demand and collecting the assessed taxes from
the PEZA. After all, a declaratory judgment as to the PEZA’s tax-exempt status is useless
unless the City isenjoined from enforcing its demand.

Injunction "is a judicial writ, process or proceeding whereby a party is ordered to do or refrain
from doing a certain act."167 "It may be the main action or merely a provisional remedy for and
as incident in the main action."168 The essential requisites of a writ of injunction are: "(1) there
must be a right in esseor the existence of a right to be protected; and (2) the act against
which the injunction is directed to constitute a violation of such right."169

We note, however, that the City confused the concepts of jurisdiction and venue in
contending that the Regional Trial Court of Pasay had no jurisdiction because the real
properties involved in this case are located in the City of Lapu-Lapu.

On the one hand, jurisdiction is "the power to hear and determine cases of the general class
to which the proceedings in question belong."170 Jurisdiction is a matter of substantive
law.171 Thus, an action may be filed only with the court or tribunal where the Constitution or a
statute says it can be brought.172 Objections to jurisdiction cannot be waived and may be
brought at any stage of the proceedings, even on appeal.173 When a case is filed with a court
which has no jurisdiction over the action, the court shall motu propriodismiss the case.174
On the other hand, venue is "the place of trial or geographical location in which an action or
proceeding should be brought." 175 In civil cases, venue is a matter of procedural law.176 A
party’s objections to venue must be brought at the earliest opportunity either in a motion to
dismiss or in the answer; otherwise the objection shall be deemed waived.177 When the venue
of a civil action is improperly laid, the court cannot motu propriodismiss the case.178

The venue of an action depends on whether the action is a real or personal action. Should
the action affect title to or possession of real property, or interest therein, it is a real action.
The action should be filed in the proper court which has jurisdiction over the area wherein the
real property involved, or a portion thereof, is situated.179 If the action is a personal action, the
action shall be filed with the proper court where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the plaintiff.180

The City was objecting to the venue of the action, not to the jurisdiction of the Regional Trial
Court of Pasay. In essence, the City was contending that the PEZA’s petition is a real action
as it affects title to or possession of real property, and, therefore, the PEZA should have filed
the petition with the Regional Trial Court of Lapu-Lapu City where the real properties are
located. However, whatever objections the City has against the venue of the PEZA’s action
for declaratory relief are already deemed waived. Objections to venue must be raised at the
earliest possible opportunity.181 The City did not file a motion to dismiss the petition on the
ground that the venue was improperly laid. Neither did the City raise this objection in its
answer.

In any event, the law sought to be judicially interpreted in this case had already been
breached. The Regional Trial Court of Pasay, therefore, had no jurisdiction over the PEZA’s
petition for declaratory relief against the City.

III.

The Court of Appeals had no jurisdiction


over the PEZA’s petition for certiorari
against the Province of Bataan

Appeal is the remedy "to obtain a reversal or modification of a judgment on the merits."182 A
judgment on the merits is one which "determines the rights and liabilities of the parties based
on the disclosed facts, irrespective of the formal, technical or dilatory objections."183 It is not
even necessary that the case proceeded to trial.184 So long as the "judgment is general"185 and
"the parties had a full legal opportunity to be heard on their respective claims and
contentions,"186 the judgment is on the merits.

On the other hand, certiorari is a special civil action filed to annul or modify a proceeding of a
tribunal, board, or officer exercising judicial or quasi-judicial functions.187 Certiorari, which in
Latin means "to be more fully informed,"188was originally a remedy in the common law. This
court discussed the history of the remedy of certiorari in Spouses Delos Santos v.
Metropolitan Bank and Trust Company:189

In the common law, from which the remedy of certiorari evolved, the writ of certiorari was
issued out of Chancery, or the King’s Bench, commanding agents or officers of the inferior
courts to return the record of a cause pending before them, so as to give the party more sure
and speedy justice, for the writ would enable the superior court to determine froman
inspection of the record whether the inferior court’s judgment was rendered without authority.
The errors were of such a nature that, if allowed to stand, they would result in a substantial
injury to the petitioner to whom no other remedy was available. If the inferior court acted
without authority, the record was then revised and corrected in matters of law. The writ of
certiorari was limited to cases in which the inferior court was said to be exceeding its
jurisdiction or was not proceeding according to essential requirements of law and would lie
only to review judicial or quasi-judicial acts.190

In our jurisdiction, the term "certiorari" is used in two ways. An appeal before this court
raising pure questions of law is commenced by filing a petition for reviewon certiorari under
Rule 45 of the Rules of Court. An appeal by certiorari, which continues the proceedings
commenced before the lower courts,191 is filed to reverse or modify judgments or final
orders.192 Under the Rules, an appeal by certiorarimust be filed within 15 days from notice of
the judgment or final order, or of the denial of the appellant’s motion for new trial or
reconsideration.193

A petition for certiorari under Rule 65, on the other hand, is an independent and original
action filed to set aside proceedings conducted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction.194 Under the Rules, a
petition for certiorari may only be filed if there is no appeal or any plain, speedy, or adequate
remedy in the ordinary course of law.195 The petition must be filed within 60 days from notice
of the judgment, order, or resolution.196

Because of the longer period to file a petition for certiorari, some litigants attempt to file
petitions for certiorari as substitutes for lost appeals by certiorari. However, Rule 65 is clear
that a petition for certiorari will not prosper if appeal is available. Appealis the proper remedy
even if the error, or one of the errors, raised is grave abuse of discretion on the part of the
court rendering judgment.197 If appeal is available, a petition for certiorari cannot be filed.

In this case, the trial court’s decision dated January 31, 2007 is a judgment on the merits.
Based on the facts disclosed by the parties, the trial court declared the PEZA liable to the
Province of Bataan for real property taxes. The PEZA’s proper remedy against the trial
court’s decision, therefore, is appeal.

Since the PEZA filed a petition for certiorari against the trial court’s decision, it availed itself
of the wrong remedy. As the Province of Bataan contended, the trial court’s decision dated
January 31, 2007 "is only an error of judgment appealable to the higher level court and may
not be corrected by filing a petition for certiorari."198 That the trial court judge allegedly
committed grave abuse of discretion does not make the petition for certiorari the correct
remedy. The PEZA should haveraised this ground in an appeal filed within 15 days from
notice of the assailed resolution.

This court, "in the liberal spirit pervading the Rules of Court and in the interest of substantial
justice,"199 has treated petitions for certiorari as an appeal: "(1) if the petition for certiorari was
filed within the reglementary period within which to file a petition for review on certiorari; (2)
when errors of judgment are averred; and (3) when there is sufficient reason to justify the
relaxation of the rules."200 Considering that "the nature of an action is determined by the
allegationsof the complaint or the petition and the character of the relief sought,"201 a petition
which "actually avers errors of judgment rather than errors than that of jurisdiction"202 may be
considered a petition for review.

However, suspending the application of the Rules has its disadvantages. Relaxing
procedural rules may reduce the "effective enforcement of substantive rights,"203 leading to
"arbitrariness, caprice, despotism, or whimsicality in the settlement of disputes."204 Therefore,
for this court to suspend the application of the Rules, the accomplishment of substantial
justice must outweigh the importance of predictability of court procedures.

The PEZA’s petition for certiorari may be treated as an appeal. First, the petition for certiorari
was filed withinthe 15-day reglementary period for filing an appeal. The PEZA filed its petition
for certiorari before the Court of Appeals on October 15, 2007,205 which was 12 days from
October 3, 2007206 when the PEZA had notice of the trial court’s order denying the motion for
reconsideration.

Second, the petition for certiorari raised errors of judgment. The PEZA argued that the trial
court erred in ruling that it is not exempt from payment of real property taxes given Section
21 of Presidential Decree No. 66 and Sections 11 and 51 of the Special Economic Zone Act
of 1995.207

Third, there is sufficient reason to relax the rules given the importance of the substantive
issue presented in this case.

However, the PEZA’s petition for certiorari was filed before the wrong court. The PEZA
should have filed its petition before the Court of Tax Appeals.

The Court of Tax Appeals has the exclusive appellate jurisdiction over local tax cases
decided by Regional Trial Courts. Section 7, paragraph (a)(3) of Republic Act No. 1125, as
amended by Republic Act No. 9282, provides:

Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

....

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or appellate
jurisdiction[.]

The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125, as
amended, include cases involving real property taxes. Real property taxation is governed by
Book II of the Local Government Code on "Local Taxation and Fiscal Matters." Real property
taxes are collected by the Local Treasurer,208 not by the Bureau of Internal Revenue in
charge of collecting national internal revenue taxes, fees, and charges.209

Section 7, paragraph (a)(5) of Republic Act No. 1125, as amended by Republic Act No.
9282, separately provides for the exclusive appellate jurisdiction of the Court of Tax Appeals
over decisions of the Central Board of Assessment Appeals involving the assessment or
collection of real property taxes:

Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

....
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals[.]

This separate provision, nevertheless, does not bar the Court of Tax Appeals from taking
cognizance of trial court decisions involving the collection of real property tax cases.
Sections 256210 and 266211 of the Local Government Code expressly allow localgovernment
units to file "in any court of competent jurisdiction" civil actions to collect basic real property
taxes. Should the trial court rule against them, local government units cannot be barred from
appealing before the Court of Tax Appeals – the "highly specialized body specifically created
for the purpose of reviewing tax cases."212

We have also ruled that the Court of Tax Appeals, not the Court of Appeals, has the
exclusive original jurisdiction over petitions for certiorari assailing interlocutory orders issued
by Regional Trial Courts in a local tax case. We explained in The City of Manila v. Hon.
Grecia-Cuerdo213 that while the Court of Tax Appeals has no express grant of power to issue
writs of certiorari under Republic Act No. 1125,214 as amended, the tax court’s judicial power
as defined in the Constitution215 includes the power to determine "whether or not there has
been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the
[Regional Trial Court] in issuing an interlocutory order of jurisdiction in cases falling within the
exclusive appellate jurisdiction of the tax court."216 We further elaborated:

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must
have the authority to issue, among others, a writ of certiorari. In transferring exclusive
jurisdiction over appealed tax cases to the CTA, it can reasonably be assumed that the law
intended to transfer also such power as is deemed necessary, if not indispensable, in aid of
such appellate jurisdiction. There is no perceivable reason why the transfer should only be
considered as partial, not total.

....

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari
petition lies with the CA, this Court would be confirming the exercise by two judicial bodies,
the CA and the CTA, of jurisdiction over basically the same subject matter – precisely the
split-jurisdiction situation which is anathema to the orderly administration of justice.The Court
cannot accept that such was the legislative motive, especially considering that the law
expressly confers on the CTA, the tribunal with the specialized competence over tax and
tariff matters, the role of judicial review over local tax cases without mention of any other
court that may exercise such power. Thus, the Court agrees with the ruling of the CA that
since appellate jurisdiction over private respondents' complaint for tax refund is vested in the
CTA, it follows that a petition for certiorari seeking nullification of an interlocutory order
issued in the said case should, likewise, be filed with the same court. To rule otherwise
would lead to an absurd situation where one court decides an appeal in the main case while
another court rules on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence
to split jurisdiction to conclude that the intention of the law is to divide the authority over a
local tax case filed with the RTC by giving to the CA or this Court jurisdiction to issue a writ of
certiorari against interlocutory orders of the RTC but giving to the CTA the jurisdiction over
the appeal from the decision of the trial court in the same case. It is more in consonance with
logic and legal soundness to conclude that the grant of appellate jurisdiction to the CTA over
tax cases filed in and decided by the RTC carries withit the power to issue a writ of certiorari
when necessary in aid of such appellate jurisdiction. The supervisory power or jurisdiction of
the CTA to issue a writ of certiorari in aid of its appellate jurisdiction should co-exist with, and
be a complement to, its appellate jurisdiction to review, by appeal, the final orders and
decisionsof the RTC, in order to have complete supervision over the acts of the
latter.217 (Citations omitted)

In this case, the petition for injunction filed before the Regional Trial Court of Pasay was a
local tax case originally decided by the trial court in its original jurisdiction. Since the PEZA
assailed a judgment, not an interlocutory order, of the Regional Trial Court, the PEZA’s
proper remedy was an appeal to the Court of Tax Appeals.

Considering that the appellate jurisdiction of the Court of Tax Appeals is to the exclusion of
all other courts, the Court of Appeals had no jurisdiction to take cognizance of the PEZA’s
petition. The Court of Appeals acted without jurisdiction in rendering the decision in CA-G.R.
SP No. 100984. Its decision in CA-G.R. SP No. 100984 is void.218

The filing of appeal in the wrong court does not toll the period to appeal. Consequently, the
decision of the Regional Trial Court, Branch 115, Pasay City, became final and executory
after the lapse of the 15th day from the PEZA’s receipt of the trial court’s decision.219 The
denial of the petition for injunction became final and executory.

IV.

The remedy of a taxpayer depends on the


stage in which the local government unit
is enforcing its authority to impose real
property taxes

The proper remedy of a taxpayer depends on the stage in which the local government unit is
enforcing its authority to collect real property taxes. For the guidance of the members of the
bench and the bar, we reiterate the taxpayer’s remedies against the erroneous or illegal
assessment of real property taxes.

Exhaustion of administrative remedies under the Local Government Code is necessary in


cases of erroneous assessments where the correctness of the amount assessed is assailed.
The taxpayer must first pay the tax then file a protest with the Local Treasurer within 30 days
from date of payment of tax.220 If protest is denied or upon the lapse of the 60-day period to
decide the protest, the taxpayer may appeal to the Local Board of Assessment Appeals
within 60 days from the denial of the protest or the lapse of the 60-day period to decide the
protest.221 The Local Board of Assessment Appeals has 120 days to decide the appeal.222

If the taxpayer is unsatisfied withthe Local Board’s decision, the taxpayer may appeal before
the Central Board of Assessment Appeals within 30 days from receipt of the Local Board’s
decision.223

The decision of the Central Board of Assessment Appeals is appealable before the Court of
Tax Appeals En Banc.224 The appeal before the Court of Tax Appeals shall be filed following
the procedure under Rule 43 of the Rules of Court.225

The Court of Tax Appeals’ decision may then be appealed before this court through a
petition for review on certiorari under Rule 45 of the Rules of Court raising pure questions of
law.226
In case of an illegal assessment where the assessment was issued without authority,
exhaustion of administrative remedies is not necessary and the taxpayer may directly resort
to judicial action.227 The taxpayer shall file a complaint for injunction before the Regional Trial
Court228 to enjoin the local government unit from collecting real property taxes.

The party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a
petition for certiorari, before the Court of Tax Appeals, the complaint being a local tax case
decided by the Regional Trial Court.229 The appeal shall be filed within fifteen (15) days from
notice of the trial court’s decision.

The Court of Tax Appeals’ decision may then be appealed before this court through a
petition for review on certiorari under Rule 45 of the Rules of Court raising pure questions of
law.230

In case the local government unit has issued a notice of delinquency, the taxpayer may file a
complaint for injunction to enjoin the impending sale of the real property at public auction. In
case the local government unit has already sold the property at public auction, the taxpayer
must first deposit with the court the amount for which the real property was sold, together
with interest of 2% per month from the date ofsale to the time of the institution of action. The
taxpayer may then file a complaint to assail the validity of the public auction.231 The decisions
of the Regional Trial Court in these cases shall be appealable before the Court of Tax
Appeals,232 and the latter’s decisions appealable before this court through a petition for review
on certiorari under Rule 45 of the Rules of Court.233

V.

The PEZA is exempt from payment of


real property taxes

The jurisdictional errors in this case render these consolidated petitions moot. We do not
review void decisions rendered without jurisdiction.

However, the PEZA alleged that several local government units, including the City of Baguio
and the Province of Cavite, have issued their respective real property tax assessments
against the PEZA. Other local government units will likely follow suit, and either the PEZA or
the local government units taxing the PEZA may file their respective actions against each
other.

In the interest of judicial economy234 and avoidance of conflicting decisions involving the
same issues,235 we resolve the substantive issue of whether the PEZA is exempt from
payment of real property taxes.

Real property taxes are annual taxes levied on real property such as lands, buildings,
machinery, and other improvements not otherwise specifically exempted under the Local
Government Code.236 Real property taxes are ad valorem, with the amount charged based on
a fixed proportion of the value of the property.237 Under the law, provinces, cities, and
municipalities within the Metropolitan Manila Area have the power to levy real property taxes
within their respective territories.238

The general rule is that real properties are subject to real property taxes. This is true
especially since the Local Government Code has withdrawn exemptions from real property
taxes of all persons, whether natural or juridical:
SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment
of real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,


mosques, nonprofit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by
local water districts and government-owned or – controlled corporations engaged in
the supply and distribution of water and/or generation and transmission of electric
power;

(d) All real property owned by duly registered cooperatives as provided under R.A.
No. 6938; and

(e) Machinery and equipment usedfor pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property taxes previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including
government-owned or -controlled corporations are hereby withdrawn upon the effectivity of
this Code. (Emphasis supplied)

The person liable for real property taxes is the "taxable person who had actual or beneficial
use and possession [of the real property for the taxable period,] whether or not [the person
owned the property for the period he or she is being taxed]."239

The exceptions to the rule are provided in the Local Government Code. Under Section
133(o), local government units have no power to levy taxes of any kind on the national
government, its agencies and instrumentalities and local government units:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:

....

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units.

Specifically on real property taxes, Section 234 enumerates the persons and real property
exempt from real property taxes:

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment
of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,


mosques, nonprofitor religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by
local water districts and government-owned or – controlled corporations engaged in
the supply and distribution of water and/or generation and transmission of electric
power;

(d) All real property owned by duly registered cooperatives as provided under R.A.
No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including all
government-owned or -controlled corporations are hereby withdrawn upon the effectivity of
this Code. (Emphasis supplied)

For persons granted tax exemptions or incentives before the effectivity of the Local
Government Code, Section 193 withdrew these tax exemption privileges. These persons
consist of both natural and juridical persons, including government-owned or controlled
corporations:

SEC. 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this
code, tax exemptions or incentives granted to or presently enjoyed by all persons, whether
natural or juridical, including government-owned or controlled corporations, except local
water districts, cooperatives duly registered under R.A. 6938, non stock and non profit
hospitals and educational institutions, are hereby withdrawn upon effectivity of this Code.

As discussed, Section 234 withdrew all tax privileges with respect to real property taxes.
Nevertheless, local government units may grant tax exemptions under such terms and
conditions asthey may deem necessary:

SEC. 192. Authority to Grant Tax Exemption Privileges. – Local government units may,
through ordinances duly approved, grant tax exemptions, incentives or reliefs under such
terms and conditions as they may deem necessary.

In Mactan Cebu International Airport Authority v. Hon. Marcos,240 this court classified the
exemptions from real property taxes into ownership, character, and usage exemptions.
Ownership exemptions are exemptions based on the ownership of the real property. The
exemptions of real property owned by the Republic of the Philippines, provinces, cities,
municipalities, barangays, and registered cooperatives fall under this
classification.241 Character exemptions are exemptions based on the character of the real
property. Thus, no real property taxes may be levied on charitable institutions, houses and
temples of prayer like churches, parsonages, or convents appurtenant thereto, mosques,
and non profitor religious cemeteries.242
Usage exemptions are exemptions based on the use of the real property. Thus, no real
property taxes may be levied on real property such as: (1) lands and buildings actually,
directly, and exclusively used for religious, charitable or educational purpose; (2)
machineries and equipment actually, directly and exclusively used by local water districts or
by government-owned or controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power; and (3) machinery and
equipment used for pollution control and environmental protection.243

Persons may likewise be exempt from payment of real properties if their charters, which
were enacted or reenacted after the effectivity of the Local Government Code, exempt them
payment of real property taxes.244

V.

(A) The PEZA is an instrumentality of the national government

An instrumentality is "any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter."245

Examples of instrumentalities of the national government are the Manila International Airport
Authority,246 the Philippine Fisheries Development Authority,247 the Government Service
Insurance System,248 and the Philippine Reclamation Authority.249 These entities are not
integrated within the department framework but are nevertheless vested with special
functions to carry out a declared policy of the national government.

Similarly, the PEZA is an instrumentality of the national government. It is not integrated


within the department framework but is an agency attached to the Department of Trade and
Industry.250 Book IV, Chapter 7, Section 38(3)(a) of the Administrative Code of 1987 defines
"attachment": SEC. 38. Definition of Administrative Relationship.– Unless otherwise
expressly stated in the Code or in other laws defining the special relationships of particular
agencies, administrative relationships shall be categorized and defined as follows:

....

(3) Attachment.– (a) This refers to the lateral relationship between the department or its
equivalent and the attached agency or corporation for purposes of policy and program
coordination. The coordination may be accomplished by having the department represented
in the governing board of the attached agency or corporation, either as chairman or as a
member, with or without voting rights, if this is permitted by the charter; having the attached
corporation or agency comply with a system of periodic reporting which shall reflect the
progress of the programs and projects; and having the department or its equivalent provide
general policies through its representative in the board, which shall serve as the framework
for the internal policies of the attached corporation or agency[.]

Attachment, which enjoys "a larger measure of independence"251 compared with other
administrative relationships such as supervision and control, is further explained in Beja, Sr.
v. Court of Appeals:252

An attached agency has a larger measure of independence from the Department to which it
is attached than one which is under departmental supervision and control or administrative
supervision. This is borne out by the "lateral relationship" between the Department and the
attached agency. The attachment is merely for "policy and program coordination." With
respect to administrative matters, the independence of an attached agency from
Departmental control and supervision is further reinforced by the fact that even an agency
under a Department’s administrative supervision is free from Departmental interference with
respect to appointments and other personnel actions "in accordance with the
decentralization of personnel functions" under the Administrative Code of 1987. Moreover,
the Administrative Code explicitly provides that Chapter 8 of Book IV on supervision and
control shall not apply to chartered institutions attached to a Department.253

With the PEZA as an attached agency to the Department of Trade and Industry, the 13-
person PEZA Board is chaired by the Department Secretary.254 Among the powers and
functions of the PEZA is its ability to coordinate with the Department of Trade and Industry
for policy and program formulation and implementation.255 In strategizing and prioritizing the
development of special economic zones, the PEZA coordinates with the Department of
Trade and Industry.256

The PEZA also administers its own funds and operates autonomously, with the PEZA Board
formulating and approving the PEZA’s annual budget.257 Appointments and other personnel
actions in the PEZA are also free from departmental interference, with the PEZA Board
having the exclusive and final authority to promote, transfer, assign and reassign officers of
the PEZA.258

As an instrumentality of the national government, the PEZA is vested with special functions
or jurisdiction by law. Congress created the PEZA to operate, administer, manage and
develop special economic zones in the Philippines.259 Special economic zones are areas with
highly developed or which have the potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and financial centers.260 By operating,
administering, managing, and developing special economic zones which attract investments
and promote use of domestic labor, the PEZA carries out the following policy of the
Government: SECTION 2. Declaration of Policy. — It is the declared policy of the
government to translate into practical realities the following State policies and mandates in
the 1987 Constitution, namely:

(a) "The State recognizes the indispensable role of the private sector, encourages
private enterprise, and provides incentives to needed investments." (Sec. 20, Art. II)

(b) "The State shall promote the preferential use of Filipino labor, domestic materials
and locally produced goods, and adopt measures that help make them competitive."
(Sec. 12, Art. XII) In pursuance of these policies, the government shall actively
encourage, promote, induce and accelerate a sound and balanced industrial,
economic and social development of the country in order to provide jobs to the
people especially those in the rural areas, increase their productivity and their
individual and family income, and thereby improve the level and quality of their living
condition through the establishment, among others, of special economic zones in
suitable and strategic locations in the country and through measures that shall
effectively attract legitimate and productive foreign investments.261

Being an instrumentality of the national government, the PEZA cannot be taxed by local
government units.
Although a body corporate vested with some corporate powers,262 the PEZA is not a
government-owned or controlled corporation taxable for real property taxes.

Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines the
term "government-owned or controlled corporation":

SEC. 2. General Terms Defined. – Unless the specific words of the text, or the context as a
whole, or a particular statute, shall require a different meaning:

....

(13) Government-owned or controlled corporation refers to any agency organized as a stock


or non-stock corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as in the case of stock corporations, to
the extent of at least fifty-one (51) per cent of its capital stock: Provided, That government
owned or controlled corporations may be further categorized by the Department of the
Budget, the Civil Service Commission, and the Commission on Audit for purposes of the
exercise and discharge of their respective powers, functions and responsibilities with respect
to such corporations.

Government entities are created by law, specifically, by the Constitution or by statute. In the
case of government-owned or controlled corporations, they are incorporated by virtue of
special charters263 to participate in the market for special reasons which may be related to
dysfunctions or inefficiencies of the market structure. This is to adjust reality as against the
concept of full competition where all market players are price takers. Thus, under the
Constitution, government-owned or controlled corporations are created in the interest of the
common good and should satisfy the test of economic viability.264 Article XII, Section 16 of the
Constitution provides:

Section 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the common
good and subject to the test of economic viability.

Economic viability is "the capacity to function efficiently in business."265 To be economically


viable, the entity "should not go into activities which the private sector can do better."266

To be considered a government-owned or controlled corporation, the entity must have been


organized as a stock or non-stock corporation.267

Government instrumentalities, on the other hand, are also created by law but partake of
sovereign functions. When a government entity performs sovereign functions, it need not
meet the test of economic viability. In Manila International Airport Authority v. Court of
Appeals,268 this court explained:

In contrast, government instrumentalities vested with corporate powers and performing


governmental orpublic functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations. These
instrumentalities are not the "government-owned or controlled corporations" referred to in
Section 16, Article XII of the 1987 Constitution.

Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or
public functions. Congress has plenary authority to create government instrumentalities
vested with corporate powers provided these instrumentalities perform essential government
functions or public services. However, when the legislature creates through special charters
corporations that perform economic or commercial activities, such entities — known as
"government-owned or controlled corporations" — must meetthe test of economic viability
because they compete in the market place.

....

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:

MR. OPLE: Madam President, the reason for this concern is really that when the government
creates a corporation, there is a sense in which this corporation becomes exempt from the
test of economic performance. We know what happened in the past. If a government
corporation loses, then it makes its claim upon the taxpayers' money through new equity
infusions from the government and what is always invoked is the common good. That is the
reason why this year, out of a budget of ₱115 billion for the entire government, about ₱28
billion of this will go into equity infusions to support a few government financial institutions.
And this is all taxpayers' money which could have been relocated to agrarian reform, to
social services like health and education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common
good," this becomes a restraint on future enthusiasts for state capitalism to excuse
themselves from the responsibility of meeting the market test so that they become viable.
And so, Madam President, I reiterate, for the committee's consideration and I am glad that I
am joined in this proposal by Commissioner Foz, the insertion of the standard of
"ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good.

....

Clearly, the test of economic viability does not apply to government entities vested with
corporate powers and performing essential public services. The State is obligated to render
essential public services regardless of the economic viability of providing such service. The
noneconomic viability of rendering such essential public service does not excuse the State
from withholding such essential services from the public.269 (Emphases and citations omitted)

The law created the PEZA’s charter. Under the Special Economic Zone Act of 1995, the
PEZA was established primarily to perform the governmental function of
operating,administering, managing, and developing special economic zones to attract
investments and provide opportunities for preferential use of Filipino labor.

Under its charter, the PEZA was created a body corporate endowed with some corporate
powers. However, it was not organized as a stock270 or non-stock271 corporation. Nothing in
the PEZA’s charter provides that the PEZA’s capital is divided into shares.272 The PEZA also
has no members who shall share in the PEZA’s profits.
The PEZA does not compete with other economic zone authorities in the country. The
government may even subsidize the PEZA’s operations. Under Section 47 of the Special
Economic Zone Act of 1995, "any sum necessary to augment [the PEZA’s] capital outlay
shall be included in the General Appropriations Act to be treated as an equity of the national
government."273

The PEZA, therefore, need not be economically viable. It is not a government-owned or


controlled corporation liable for real property taxes.

V. (B)

The PEZA assumed the non-profit character, including the tax exempt status, of the EPZA

The PEZA’s predecessor, the EPZA, was declared non-profit in character with all its
revenues devoted for its development, improvement, and maintenance. Consistent with this
non-profit character, the EPZA was explicitly declared exempt from real property taxes under
its charter. Section 21 of Presidential Decree No. 66 provides:

Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall
be non-profit and shall devote and use all its returns from its capital investment, as well as
excess revenues from its operations, for the development, improvement and maintenance
and other related expenditures of the Authority to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section 1 of this Decree.
In consonance therewith, the Authority is hereby declared exempt:

....

(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and
licenses to be paid to the National Government, its provinces, cities, municipalities and other
government agencies and instrumentalities[.]

The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt the
PEZA from payment of real property taxes.

Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its
charter. A provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA
is unnecessary. The PEZA assumed the real property exemption of the EPZA under
Presidential Decree No. 66.

Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA "to evolve into the
PEZA in accordance with the guidelines and regulations set forth in an executive order
issued for this purpose." President Ramos then issued Executive Order No. 282 in 1995,
ordering the PEZA to assume the EPZA’s powers, functions, and responsibilities under
Presidential Decree No. 66 not inconsistent with the Special Economic Zone Act of 1995:

SECTION 1. Assumption of EPZA’s Powers and Functions by PEZA. All the powers,
functions and responsibilities of EPZA as provided under its Charter, Presidential Decree No.
66, as amended, insofar as they are not inconsistent with the powers,functions and
responsibilities of the PEZA, as mandated under Republic Act No. 7916, shall hereafter be
assumed and exercised by the PEZA. Henceforth, the EPZA shall be referred to as the
PEZA.
The following sections of the Special Economic Zone Act of 1995 provide for the PEZA’s
powers,functions, and responsibilities:

SEC. 5. Establishment of ECOZONES. – To ensure the viability and geographical dispersal


of ECOZONES through a system of prioritization, the following areas are initially identified as
ECOZONES, subject to the criteria specified in Section 6:

....

The metes and bounds of each ECOZONE are to be delineated and more particularly
described in a proclamation to be issued by the President of the Philippines, upon the
recommendation of the Philippine Economic Zone Authority (PEZA), which shall be
established under this Act, in coordination with the municipal and / or city council, National
Land Use Coordinating Committee and / or the Regional Land Use Committee.

SEC. 6. Criteria for the Establishment of Other ECOZONES. – In addition to the ECOZONES
identified in Section 5 of this Act, other areas may be established as ECOZONES in a
proclamation to be issued by the President of the Philippines subject to the evaluation and
recommendation of the PEZA, based on a detailed feasibility and engineering study which
must conform to the following criteria:

(a) The proposed area must be identified as a regional growth center in the Medium-
Term Philippine Development Plan or by the Regional Development Council;

(b) The existence of required infrastructure in the proposed ECOZONE, such as


roads, railways, telephones, ports, airports, etc., and the suitability and capacity of
the proposed site to absorb such improvements;

(c) The availability of water source and electric power supply for use of the
ECOZONE;

(d) The extent of vacant lands available for industrial and commercial development
and future expansion of the ECOZONE as well as of lands adjacent to the
ECOZONE available for development of residential areas for the ECOZONE
workers;

(e) The availability of skilled, semi-skilled and non-skilled trainable labor force in and
around the ECOZONE;

(f) The area must have a significant incremental advantage over the existing
economic zones and its potential profitability can be established;

(g) The area must be strategically located; and

(h) The area must be situated where controls can easily be established to curtail
smuggling activities.

Other areas which do not meet the foregoing criteria may be established as ECOZONES:
Provided, That the said area shall be developed only through local government and/or
private sector initiative under any of the schemes allowed in Republic Act No. 6957 (the
build-operate-transfer law), and without any financial exposure on the part of the national
government: Provided, further, That the area can be easily secured to curtail smuggling
activities: Provided, finally, That after five (5) years the area must have attained a substantial
degree of development, the indicators of which shall be formulated by the PEZA.

SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial, Commercial / Trading,


Tourist, Investment and Financial Community. - Within the framework of the Constitution, the
interest of national sovereignty and territorial integrity of the Republic, ECOZONE shall be
developed, as much as possible, into a decentralized, self-reliant and self-sustaining
industrial, commercial/trading, agro-industrial, tourist, banking, financial and investment
center with minimum government intervention. Each ECOZONE shall be provided with
transportation, telecommunications, and other facilities needed to generate linkage with
industries and employment opportunitiesfor its own inhabitants and those of nearby towns
and cities.

The ECOZONE shall administer itself on economic, financial, industrial, tourism development
and such other matters within the exclusive competence of the national government.

The ECOZONE may establish mutually beneficial economic relations with other entities
within the country, or, subject to the administrative guidance of the Department of Foreign
Affairs and/or the Department of Trade and Industry, with foreign entities or enterprises.

Foreign citizens and companies owned by non-Filipinos in whatever proportion may set up
enterprises in the ECOZONE, either by themselves or in joint venture with Filipinos in any
sector of industry, international trade and commerce within the ECOZONE. Their assets,
profits and other legitimate interests shall be protected: Provided, That the ECOZONE
through the PEZA may require a minimum investment for any ECOZONE enterprises in
freely convertible currencies: Provided, further, That the new investment shall fall under the
priorities, thrusts and limits provided for in the Act.

SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. – The


ECOZONE shall be managed and operated by the PEZA as separate customs territory.

The PEZA is hereby vested with the authority to issue certificate of origin for products
manufactured or processed in each ECOZONE in accordance with the prevailing rules or
origin, and the pertinent regulations of the Department of Trade and Industry and/or the
Department of Finance.

SEC. 9. Defense and Security. – The defense of the ECOZONE and the security of its
perimeter fence shall be the responsibility of the national government in coordination with the
PEZA. Military forces sent by the national government for the purpose of defense shall not
interfere in the internal affairs of any of the ECOZONE and expenditure for these military
forces shall be borne by the national government. The PEZA may provide and establish the
ECOZONES’ internal security and firefighting forces.

SEC. 10. Immigration. – Any investor within the ECOZONE whose initial investment shall not
be less than One Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and
dependent children under twenty-one (21) years of age shall be granted permanent resident
status within the ECOZONE. They shall have freedom of ingress and egress to and from the
ECOZONE without any need of special authorization from the Bureau of Immigration.

The PEZA shall issue working visas renewable every two (2) years to foreign executives and
other aliens, processing highly-technical skills which no Filipino within the ECOZONE
possesses, as certified by the Department of Labor and Employment. The names of aliens
granted permanent resident status and working visas by the PEZA shall be reported to the
Bureau of Immigration within thirty (30) days after issuance thereof.

SEC. 13. General Powers and Functions of the Authority. – The PEZA shall have the
following powers and functions:

(a) To operate, administer, manage and develop the ECOZONE according to the
principles and provisions set forth in this Act;

(b) To register, regulate and supervise the enterprises in the ECOZONE in an


efficient and decentralized manner;

(c) To coordinate with local government units and exercise general supervision over
the development, plans, activities and operations of the ECOZONES, industrial
estates, export processing zones, free trade zones, and the like;

(d) In coordination with local government units concerned and appropriate agencies,
to construct,acquire, own, lease, operate and maintain on its own or through
contract, franchise, license, bulk purchase from the private sector and build-operate-
transfer scheme or joint venture, adequate facilities and infrastructure, such as light
and power systems, water supply and distribution systems, telecommunication and
transportation, buildings, structures, warehouses, roads, bridges, ports and other
facilities for the operation and development of the ECOZONE;

(e) To create, operate and/or contractto operate such agencies and functional units
or offices of the authority as it may deem necessary;

(f) To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise
dispose of personal or real property; sue and be sued; and otherwise carry out its
duties and functions as provided for in this Act;

(g) To coordinate the formulation and preparation of the development plans of the
different entities mentioned above;

(h) To coordinate with the National Economic Development Authority (NEDA), the
Department of Trade and Industry (DTI), the Department of Science and Technology
(DOST), and the local government units and appropriate government agencies for
policy and program formulation and implementation; and

(i) To monitor and evaluate the development and requirements of entities in


subsection (a) and recommend to the local government units or other appropriate
authorities the location, incentives, basic services, utilities and infrastructure required
or to be made available for said entities.

SEC. 17. Investigation and Inquiries. – Upon a written formal complaint made under oath,
which on its face provides reasonable basis to believe that some anomaly or irregularity
might have been committed, the PEZA or the administrator of the ECOZONE concerned,
shall have the power to inquire into the conduct of firms or employees of the ECOZONE and
to conduct investigations, and for that purpose may subpoena witnesses, administer oaths,
and compel the production of books, papers, and other evidences: Provided, That to arrive at
the truth, the investigator(s) may grant immunity from prosecution to any person whose
testimony or whose possessions of documents or other evidence is necessary or convenient
to determine the truth in any investigation conducted by him or under the authority of the
PEZA or the administrator of the ECOZONE concerned.

SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of
development of each ECOZONE established pursuant to this Act shall be formulated by the
PEZA, in coordination with the Department of Trade and Industry and the National Economic
and Development Authority; Provided, That such development strategy is consistent with the
priorities of the national government as outlined in the medium-term Philippine development
plan. It shall be the policy of the government and the PEZA to encourage and provide
Incentives and facilitate private sector participation in the construction and operation of public
utilities and infrastructure in the ECOZONE, using any of the schemes allowed in Republic
Act No. 6957 (the build-operate-transfer law).

SEC. 22. Survey of Resources. The PEZA shall, in coordination with appropriate authorities
and neighboring cities and municipalities, immediately conduct a survey of the physical,
natural assets and potentialities of the ECOZONE areas under its jurisdiction.

SEC. 26. Domestic Sales. – Goods manufactured by an ECOZONE enterprise shall be made
available for immediate retail sales in the domestic market, subject to payment of
corresponding taxes on the raw materials and other regulations that may be adopted by the
Board of the PEZA. However, in order to protect the domestic industry, there shall be a
negative list of Industries that willbe drawn up by the PEZA. Enterprises engaged in the
industries included in the negative list shall not be allowed to sell their products locally. Said
negative list shall be regularly updated by the PEZA.

The PEZA, in coordination with the Department of Trade and Industry and the Bureau of
Customs, shall jointly issue the necessary implementing rules and guidelines for the effective
Implementation of this section.

SEC. 29. Eminent Domain. – The areas comprising an ECOZONE may be expanded or
reduced when necessary. For this purpose, the government shall have the power to acquire,
either by purchase, negotiation or condemnation proceedings, any private lands within or
adjacent to the ECOZONE for:

a. Consolidation of lands for zone development purposes;

b. Acquisition of right of way to the ECOZONE; and

c. The protection of watershed areas and natural assets valuable to the prosperity of
the ECOZONE.

If in the establishment of a publicly-owned ECOZONE, any person or group of persons who


has been occupying a parcel of land within the Zone has to be evicted, the PEZA shall
provide the person or group of persons concerned with proper disturbance compensation:
Provided, however, That in the case of displaced agrarian reform beneficiaries, they shall be
entitled to the benefits under the Comprehensive Agrarian Reform Law, including but not
limited to Section 36 of Republic Act No. 3844, in addition to a homelot in the relocation site
and preferential employment in the project being undertaken.
SEC. 32. Shipping and Shipping Register. – Private shipping and related business including
private container terminals may operate freely in the ECOZONE, subject only to such
minimum reasonable regulations of local application which the PEZA may prescribe.

The PEZA shall, in coordination with the Department of Transportation and Communications,
maintain a shipping register for each ECOZONE as a business register of convenience for
ocean-going vessels and issue related certification.

Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the
ECOZONE, subject only to such reasonable requirement as may be prescribed by the PEZA
In coordination with the appropriate agencies of the national government.

SEC. 33. Protection of Environment. - The PEZA, in coordination with the appropriate
agencies, shall take concrete and appropriate steps and enact the proper measure for the
protection of the local environment.

SEC. 34. Termination of Business. - Investors In the ECOZONE who desire to terminate
business or operations shall comply with such requirements and procedures which the PEZA
shall set, particularly those relating to the clearing of debts. The assets of the closed
enterprise can be transferred and the funds con be remitted out of the ECOZONE subject to
the rules, guidelines and procedures prescribed jointly by the Bangko Sentral ng Pilipinas,
the Department of Finance and the PEZA.

SEC. 35. Registration of Business Enterprises. - Business enterprises within a designated


ECOZONE shall register with the PEZA to avail of all incentives and benefits provided for in
this Act.

SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop center for the
purpose of facilitating the registration of new enterprises in the ECOZONE. Thus, all
appropriate government agencies that are Involved In registering, licensing or issuing
permits to investors shall assign their representatives to the ECOZONE to attend to
Investor’s requirements.

SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the Department of
Tabor and Employment, shall prescribe a master employment contract for all ECOZONE
enterprise staff members and workers, the terms of which provide salaries and benefits not
less than those provided under this Act, the Philippine Labor Code, as amended, and other
relevant issuances of the national government.

SEC. 41. Migrant Worker. - The PEZA, in coordination with the Department of Labor and
Employment, shall promulgate appropriate measures and programs leading to the expansion
of the services of the ECOZONE to help the local governments of nearby areas meet the
needs of the migrant workers.

SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half (1/2) of the
value of training expenses incurred in developing skilled or unskilled labor or for managerial
or other management development programs incurred by enterprises in the ECOZONE can
be deducted from the national government's share of three percent (3%) as provided In
Section 24.
The PEZA, the Department of Labor and Employment, and the Department of Finance shall
jointly make a review of the incentive scheme provided In this section every two (2) years or
when circumstances so warrant.

SEC. 43. Relationship with the Regional Development Council. - The PEZA shall determine
the development goals for the ECOZONE within the framework of national development
plans, policies and goals, and the administrator shall, upon approval by the PEZA Board,
submit the ECOZONE plans, programs and projects to the regional development council for
inclusion in and as inputs to the overall regional development plan.

SEC. 44. Relationship with the Local Government Units. - Except as herein provided, the
local government units comprising the ECOZONE shall retain their basic autonomy and
identity. The cities shall be governed by their respective charters and the municipalities shall
operate and function In accordance with Republic Act No. 7160, otherwise known as the
Local Government Code of 1991.

SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. – Privately-owned


industrial estates shall retain their autonomy and independence and shall be monitored by
the PEZA for the implementation of incentives.

SEC. 46. Transfer of Resources. - The relevant functions of the Board of Investments over
industrial estates and agri-export processing estates shall be transferred to the PEZA. The
resources of government owned Industrial estates and similar bodies except the Bases
Conversion Development Authority and those areas identified under Republic Act No. 7227,
are hereby transferred to the PEZA as the holding agency. They are hereby detached from
their mother agencies and attached to the PEZA for policy, program and operational
supervision.

The Boards of the affected government-owned industrial estates shall be phased out and
only the management level and an appropriate number of personnel shall be retained.

Government personnel whose services are not retained by the PEZA or any government
office within the ECOZONE shall be entitled to separation pay and such retirement and other
benefits theyare entitled to under the laws then in force at the time of their separation:
Provided, That in no case shall the separation pay be less than one and one-fourth (1 1/4)
month of every year of service.

The non-profit character of the EPZA under Presidential Decree No. 66 is not inconsistent
with any of the powers, functions, and responsibilities of the PEZA. The EPZA’s non-profit
character, including the EPZA’s exemption from real property taxes, must be deemed
assumed by the PEZA.

In addition, the Local Government Code exempting instrumentalities of the national


government from real property taxes was already in force274 when the PEZA’s charter was
enacted in 1995. It would have been redundant to provide for the PEZA’s exemption in its
charter considering that the PEZA is already exempt by virtue of Section 133(o) of the Local
Government Code.

As for the EPZA, Commonwealth Act No. 470 or the Assessment Law was in force when the
EPZA’s charter was enacted. Unlike the Local Government Code, Commonwealth Act No.
470 does not contain a provision specifically exempting instrumentalities of the national
government from payment of real property taxes.275 It was necessary to put an exempting
provision in the EPZA’s charter.

Contrary to the PEZA’s claim, however, Section 24 of the Special Economic Zone Act of
1995 is not a basis for the PEZA’s exemption. Section 24 of the Special Economic Zone Act
of 1995 provides:

Sec. 24. Exemption from National and Local Taxes. — Except for real property taxes on land
owned by developers, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross
income earned by all business enterprises within the ECOZONEshall be paid and remitted
as follows:

(a) Three percent (3%) to the National Government;

(b) Two percent (2%) which shall be directly remitted by the business establishments
to the treasurer's office of the municipality or city where the enterprise is located.
(Emphasis supplied)

Tax exemptions provided under Section 24 apply only to business establishments operating
within economic zones. Considering that the PEZA is not a business establishment but an
instrumentality performing governmental functions, Section 24 is inapplicable to the PEZA.
Also, contrary to the PEZA’s claim, developers ofeconomic zones, whether public or private
developers, are liable for real property taxes on lands they own. Section 24 does not
distinguish between a public and private developer. Thus, courts cannot distinguish.276 Unless
the public developer is exempt under the Local Government Code or under its charter
enacted after the Local Government Code’s effectivity, the public developer must pay real
property taxes on their land.

At any rate, the PEZA cannot be taxed for real property taxes even if it acts as a developer
or operator of special economic zones. The PEZA is an instrumentality of the national
government exempt from payment of real property taxes under Section 133(o) of the Local
Government Code. As this court said in Manila International Airport Authority, "there must be
express language in the law empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved against local
governments."277

V. (C)

Real properties under the PEZA’s title are owned by the Republic of the Philippines

Under Section 234(a) of the LocalGovernment Code, real properties owned by the Republic
of the Philippines are exempt from real property taxes:

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment
of real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person[.]
Properties owned by the state are either property of public dominion or patrimonial property.
Article 420 of the Civil Code of the Philippines enumerates property of public dominion:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar
character;

(2) Those which belong to the State, without belonging for public use, and are
intended for some public service or for the development of the national wealth.

Properties of public dominion are outside the commerce of man. These properties are
exempt from "levy, encumbrance or disposition through public or private sale."278 As this court
explained in Manila International Airport Authority:

Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction
sale of any property of public dominion is void for being contrary to public policy. Essential
public services will stop if properties of public dominion are subject to encumbrances,
foreclosures and auction sale[.]279

On the other hand, all other properties of the state that are not intended for public use or are
not intended for some public service or for the development of the national wealth are
patrimonial properties. Article 421 of the Civil Code of the Philippines provides:

Art. 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.

Patrimonial properties are also properties of the state, but the state may dispose of its
patrimonial property similar to private persons disposing of their property. Patrimonial
properties are within the commerce of man and are susceptible to prescription, unless
otherwise provided.280

In this case, the properties sought to be taxed are located in publicly owned economic zones.
These economic zones are property of public dominion. The City seeks to tax properties
located within the Mactan Economic Zone,281 the site of which was reserved by President
Marcos under Proclamation No. 1811, Series of 1979. Reserved lands are lands of the public
domain set aside for settlement or public use, and for specific public purposes by virtue of a
presidential proclamation.282 Reserved lands are inalienable and outside the commerce of
man,283 and remain property of the Republic until withdrawn from publicuse either by law or
presidential proclamation.284 Since no law or presidential proclamation has been issued
withdrawing the site of the Mactan Economic Zone from public use, the property remains
reserved land.

As for the Bataan Economic Zone, the law consistently characterized the property as a port.
Under Republic Act No. 5490, Congress declared Mariveles, Bataan "a principal port of
entry"285 to serve as site of a foreign trade zone where foreign and domestic merchandise
may be brought in without being subject to customs and internal revenue laws and
regulations of the Philippines.286
Section 4 of Republic Act No. 5490 provided that the foreign trade zone in Mariveles, Bataan
"shall at all times remain to be owned by the Government":

SEC. 4. Powers and Duties.– The Foreign Trade Zone Authority shall have the following
powers and duties:

a. To fix and delimit the site of the Zone which at all times remain to be owned by the
Government, and which shall have a contiguous and adequate area with well defined and
policed boundaries, with adequate enclosures to segregate the Zone from the customs
territory for protection of revenues, together with suitable provisions for ingress and egress of
persons, conveyance, vessels and merchandise sufficient for the purpose of this Act[.]
(Emphasis supplied)

The port in Mariveles, Bataan then became the Bataan Economic Zone under the Special
Economic Zone Act of 1995.287 Republic Act No. 9728 then converted the Bataan Economic
Zone into the Freeport Area of Bataan.288

A port of entry, where imported goods are unloaded then introduced in the market for public
consumption, is considered property for public use. Thus, Article 420 of the Civil Code
classifies a port as property of public dominion. The Freeport Area of Bataan, where the
government allows tax and duty-free importation of goods,289 is considered property of public
dominion. The Freeport Area of Bataan is owned by the state and cannot be taxed under
Section 234(a) of the Local Government Code.

Properties of public dominion, even if titled in the name of an instrumentality as in this case,
remain owned by the Republic of the Philippines. If property registered in the name of an
instrumentality is conveyed to another person,the property is considered conveyed on behalf
of the Republic of the Philippines. Book I, Chapter 12, Section 48 of the Administrative Code
of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. – Whenever real property of the
government is authorized by law to be conveyed, the deed of conveyance shall be executed
in behalf of the government by the following:

....

(2) For property belonging to the Republic of the Philippines, but titled in the name of any
political subdivision orof any corporate agency or instrumentality, by the executive head of
the agency or instrumentality. (Emphasis supplied)

In Manila International Airport Authority, this court explained:

[The exemption under Section 234(a) of the Local Government Code] should be read in
relation with Section 133(o) of the same Code, which prohibits local governments from
imposing "[t]axes, fess or charges of any kind on the National Government, its agencies and
instrumentalitiesx x x." The real properties owned by the Republic are titled either in the
name of the Republic itself or in the name of agencies or instrumentalities of the National
Government.The Administrative Code allows real property owned by the Republic to be titled
in the name of agencies or instrumentalities of the national government. Such real properties
remained owned by the Republic of the Philippines and continue to be exempt from real
estate tax.
The Republic may grant the beneficialuse of its real property to an agency or instrumentality
of the national government. This happens when title of the real property is transferred to an
agency or instrumentality even as the Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax exemption/ Section 234(a) of the Local
Government Code states that real property owned by the Republic loses its tax exemption
only if the "beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person." . . .290 (Emphasis in the original; italics supplied)

Even the PEZA’s lands and buildings whose beneficial use have been granted to other
persons may not be taxed with real property taxes. The PEZA may only lease its lands and
buildings to PEZA-registered economic zone enterprises and entities.291 These PEZA-
registered enterprises and entities, which operate within economic zones, are not subject to
real property taxes. Under Section 24 of the Special Economic Zone Act of 1995, no taxes,
whether local or national, shall be imposed on all business establishments operating within
the economic zones: SEC. 24. Exemption from National and Local Taxes. – Except for real
property on land owned by developers, no taxes, local and national, shall be imposed on
business establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of
the gross income earned by all business enterprises within the ECOZONE shall be paid and
remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to the
treasurer’s office of the municipality or city where the enterprise is located.292 (Emphasis
supplied)

In lieu of revenues from real property taxes, the City of Lapu-Lapu collects two-fifths of 5%
final tax on gross income paid by all business establishments operating withinthe Mactan
Economic Zone:

SEC. 24. Exemption from National and Local Taxes. – Except for real property on land
owned by developers, no taxes, local and national, shall be imposed on business
establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross
income earned by all business enterprises within the ECOZONE shall be paid and remitted
as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments
to the treasurer’s office of the municipality or city where the enterprise is
located.293 (Emphasis supplied)

For its part, the Province of Bataan collects a fifth of the 5% final tax on gross income paid by
all business establishments operating within the Freeport Area of Bataan:

Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. - No
taxes, local and national, shall be imposed on business establishments operating withinthe
FAB. In lieu thereof, said business establishments shall pay a five percent (5%) final tax on
their gross income earned in the following percentages:

(a) One per centum (1%) to the National Government;


(b) One per centum (1%) to the Province of Bataan;

(c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles; and

(d) Two per centum (2%) to the Authority of the Freeport of Area of
Bataan.294 (Emphasis supplied)

Petitioners, therefore, are not deprived of revenues from the operations of economic zones
within their respective territorial jurisdictions.

The national government ensured that loeal government units comprising economic zones
shall retain their basic autonomy and identity.295

All told, the PEZA is an instrumentality of the national government. Furthermore, the lands
1âw phi 1

owned by the PEZA are real properties owned by the Republic of the Philippines. The City of
Lapu-Lapu and the Province of Bataan cannot collect real property taxes from the PEZA.

WHEREFORE, the consolidated petitions are DENIED.

SO ORDERED.
G.R. No. 176508 January 12, 2015

SAINT MARY CRUSADE TO ALLEVIATE POVERTY OF BRETHREN FOUNDATION,


INC., Petitioner,
vs.
HON. TEODORO T. RIEL, ACTING PRESIDING JUDGE, REGIONAL TRIAL COURT,
NATIONAL CAPITAL JUDICIAL REGION, BRANCH 85, QUEZON CITY, Respondent.

x-----------------------x

UNIVERSITY OF THE PHILIPPINES, Intervenor.

DECISION

BERSAMIN, J.:

A petition for the judicial reconstitution of a Torrens title must strictly comply with the
requirements prescribed in Republic Act No. 26;1 otherwise, the petition should be dismissed.

This case is a direct resort to the Court by petition for certiorari and mandamus. The
petitioner applied for the judicial reconstitution of Original Certificate of Title (OCT) No. 1609
of the Register of Deeds of Quezon City, and for the issuance of a new OCT in place thereof,
docketed as L.R.C. Case No. Q-18987 (04), but respondent Acting Presiding Judge of
Branch 85 of the Regional Trial Court (RTC) in Quezon City dismissed the petition for
reconstitution through the assailed order dated September 12, 2006. The petitioner alleges
that the respondent Judge thereby committed grave abuse of discretion and unlawful neglect
of performance of an act specifically enjoined upon him. Equally assailed is the ensuing
denial of its motion for reconsideration through the order dated February 5, 2007.

The antecedents follow.

On October 28, 2004, the petitioner claimed in its petition for reconstitution that the original
copy of OCT No. 1609 had been burnt and lost in the fire that gutted the Quezon City
Register of Deeds in the late 80’s. Initially, respondent Judge gave due course to the petition,
but after the preliminary hearing, he dismissed the petition for reconstitution through the first
assailed order of September 12, 2006,2 to wit:

With the receipt of Report dated July 14, 2006 from Land Registration Authority (LRA)
recommending that the petition be dismissed, and considering the Opposition filed by the
Republic of the Philippines and University of the Philippines, the above-entitled petition is
hereby ordered DISMISSED.

On October 11, 2006, the petitioner moved for reconsideration of the dismissal,3 attaching
the following documents to support its petition for reconstitution, namely: (1) the copy of the
original application for registration dated January 27, 1955; (2) the notice of initial hearing
dated June 23, 1955; (3) the letter of transmittal to the Court of First Instance in Quezon City;
(4) the copy of the Spanish Testimonial Title No. 3261054 dated March 25, 1977 in the name
of Eladio Tiburcio; (5) the copy of Tax Assessment No. 14238; and (6) the approved Plan
SWD-37457.
On February 5, 2007, the RTC denied the motion for reconsideration for lack of any cogent
or justifiable ground to reconsider.4

Hence, on February 22, 2007, the petitioner came directly to the Court alleging that
respondent Judge had "unfairly abused his discretion and unlawfully neglected the
performance of an act which is specifically enjoined upon him as a duly [sic] under Rule 7,
Section 8, of the Revised Rules of Court;"5 that "in finally dismissing the herein subject
Petition for Reconsideration, respondent Honorable Acting Presiding Judge has acted
without and in excess of his authority and with grave abuse of discretion to the further
damage and prejudice of the herein petitioner;"6 and that it had no other remedy in the
course of law except through the present petition for certiorari and mandamus.

Issues

The Court directed respondent Judge and the Office of the Solicitor General (OSG) to
comment on the petition for certiorari and mandamus. Respondent Judge submitted his
comment on May 23, 2007,7 and the OSG its comment on July 19, 2007.8 On November 13,
2007, the University of the Philippines (UP) sought leave to intervene, attaching to its motion
the intended comment/opposition-in-intervention.9 The motion for the UP’s intervention was
granted on November 28, 2007.10 In turn, the petitioner presented its consolidated reply on
February 8, 2008.11 The parties, except respondent Judge, then filed their memoranda in
compliance with the Court’s directive.

Respondent Judge justified the dismissal of the petition for reconstitution by citing the
opposition by the OSG and the UP, as well as the recommendation of the Land Registration
Authority (LRA). He pointed out that the petitioner did not present its purported Torrens title
to be reconstituted; that the petitioner’s claim was doubtful given the magnitude of 4,304,623
square meters as the land area involved;12 and that the UP’s ownership of the portion of land
covered by petitioner’s claim had long been settled by the Court in a long line of cases.13

The OSG and the UP argued that by directly coming to the Court by petition for certiorari and
mandamus, the petitioner had availed itself of the wrong remedies to substitute for its
lostappeal; that the correct recourse for the petitioner was an appeal considering that the two
assailed orders already finally disposed of the case; that the petitioner intended its petition
for certiorari and mandamus to reverse the final orders;14 that the petitioner further failed to
observe the doctrine of hierarchy of courts, despite the Court of Appeals (CA) having
concurrent jurisdiction with the Court over special civil actions under Rule 65;15 that the RTC
would have gravely erred had it proceeded on the petition for reconstitution despite the
petitioner not having notified the adjoining owners of the land or other parties with interest
over the land;16 that the petitioner had no factual and legal bases for reconstitution due to its
failure to prove the existence and validity of the certificate of title sought to be reconstituted,
in addition to the ownership of the land covered by the petition for reconstitution being
already settled in a long line of cases; that the petitioner’s claim over the land was derived
from the Deed of Assignment executed by one Marcelino Tiburcio – the same person whose
claim had long been settled and disposed of in Tiburcio v. People’s Homesite and Housing
Corporation and University of the Philippines (106 Phil. 477), which vested title in the UP,
and in Cañero v. University of the Philippines (437 SCRA 630); and that the Deed of Transfer
and Conveyance dated November 26, 1925 executed by Tiburcio in favor of St. Mary Village
Association, Inc. was not a basis for the judicial reconstitution of title accepted under Section
2 of Republic Act No. 26.
In its memorandum, the petitioner indicates that the RTC gravely abused its discretion
amounting to lackor excess of its jurisdiction in dismissing its petition for reconstitution on the
basis of the recommendation of the LRA and the opposition of the Republic and the
UPdespite having initially given due course to the petition for reconstitution. It urges that the
dismissal should be overturned because it was not given a chance to comment on the
recommendation of the LRA, or to controvert the oppositions filed.17 It contends that the LRA
report did not substantiate the allegation of dismissal of the application for registration of
Marcelino Tiburcio on October 17, 1955, in addition to the veracity of the report being
questionable by virtue of its not having been under oath.18

Ruling

The petition for certiorari and mandamus, being devoid of procedural and substantive merit,
is dismissed.

Firstly, certiorari, being an extraordinary remedy, is granted only under the conditions defined
by the Rules of Court. The conditions are that: (1) the respondent tribunal, board or officer
exercising judicial or quasi judicial functions has acted without or inexcess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and
(2) there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of
law.19Without jurisdiction means that the court acted with absolute lack of authority; there is
excess of jurisdiction when the court transcends its power or acts without any statutory
authority; grave abuse of discretionimplies such capricious and whimsical exercise of
judgment as to be equivalent to lack or excess of jurisdiction; in other words, power is
exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal
hostility; and such exercise isso patent or so gross as to amount to an evasion of a positive
duty or to a virtual refusal either to perform the duty enjoined or to act at all in contemplation
of law.20

The petition for certiorari and mandamus did not show how respondent Judge could have
been guilty of lacking or exceeding his jurisdiction, or could have gravely abused his
discretion amounting to lack or excess of jurisdiction. Under Section 12 21 of Republic Act No.
26, the law on the judicial reconstitution of a Torrens title, the Regional Trial Court (as the
successor of the Court of First Instance) had the original and exclusive jurisdiction to act on
the petition for judicial reconstitution of title. Hence, the RTC neither lacked nor exceeded its
authority in acting on and dismissing the petition. Nor did respondent Judge gravely abuse
his discretion amounting to lack or excess of jurisdiction considering that the petition for
reconstitution involved land already registered in the name of the UP, as confirmed by the
LRA. Instead, it would have been contrary to law had respondent Judge dealt with and
granted the petition for judicial reconstitution of title of the petitioner.

Secondly, the petitioner did not present the duplicate or certified copy of OCT No. 1609.
Thereby, it disobeyed Section 2 and Section 3 of Republic Act No. 26, the provisions that
expressly listed the acceptable bases for judicial reconstitution of an existing Torrens title, to
wit: Sec. 2. Original certificates of titleshall be reconstituted from such of the sources
hereunder enumerated asmay be available, in the following order:

(a) The owner's duplicate of the certificate of title;

(b) The co-owner's, mortgagee's,or lessee's duplicate of the certificate of title;


(c) A certified copy of the certificate of title, previously issued by the register of deeds
or by a legal custodian thereof;

(d) An authenticated copy of the decree of registration or patent, as the case may be,
pursuant to which the original certificate of title was issued;

(e) A document, on file in the registry of deeds, by which the property, the description
of which is given in said document, is mortgaged, leased or encumbered, or an
authenticated copy of said document showing that its original had been registered;
and

(f) Any other document which, in the judgment of the court, is sufficient and proper
basis for reconstituting the lost or destroyed certificate of title.

Sec. 3. Transfer certificates of title shall be reconstituted from such of the sources hereunder
enumerated asmay be available, in the following order:

(a) The owner's duplicate of the certificate of title;

(b) The co-owner's, mortgagee's,or lessee's duplicate of the certificate of title;

(c) A certified copy of the certificate of title, previously issued by the register of deeds
or by a legal custodian thereof;

(d) The deed of transfer or other document, on file in the registry of deeds, containing
the description of the property, or an authenticated copy thereof, showing that its
original had been registered, and pursuant to which the lost or destroyed transfer
certificate of title was issued;

(e) A document, on file in the registry of deeds, by which the property, the description
of which is given in said document, is mortgaged, leased or encumbered, or an
authenticated copy of said document showing that its original had been registered;
and

(f) Any other document which, in the judgment of the court, is sufficient and proper
basis for reconstituting the lost or destroyed certificate of title.

Thirdly, with the questioned orders of the RTC having finally disposed of the application for
judicial reconstitution, nothing more was left for the RTC to do in the case. As of then,
therefore, the correct recourse for the petitioner was to appeal to the Court of Appeals by
notice of appeal within 15 days from notice of the denial of its motion for reconsideration. By
allowing the period of appeal toelapse without taking action, it squandered its right to appeal.
Its present resort to certiorari is impermissible, for an extraordinary remedy like certiorari
cannot be a substitute for a lost appeal. That the extraordinary remedy of certiorari is not an
alternative to an available remedy inthe ordinary course of law is clear from Section 1 of Rule
65, which requires that there must be no appeal, or any plain, speedy, and adequate remedy
in the ordinary course of law. Indeed, no error of judgment by a court will be corrected by
certiorari, which corrects only jurisdictional errors.22

Fourthly, the filing of the instant special civil action directly in this Court is in disregard of the
doctrine of hierarchy of courts. Although the Court has concurrent jurisdiction with the Court
of Appeals in issuing the writ of certiorari, direct resort is allowed only when there are
special, extraordinary or compelling reasons that justify the same. The Court enforces the
observance of the hierarchy of courts in order to free itself from unnecessary, frivolous and
impertinent cases and thus afford time for it to deal with the more fundamental and more
essential tasks that the Constitution has assigned to it.23 There being no special, important or
compelling reason, the petitioner thereby violated the observance of the hierarchy of courts,
warranting the dismissal of the petition for certiorari.

Finally, the land covered by the petition for judicial reconstitution related to the same area
that formed the UP campus. The UP’s registered ownership of the land comprising its
1âwphi1

campus has long been settled under the law. Accordingly, the dismissal of the petition for
judicial reconstitution by respondent Judge only safeguarded the UP’s registered ownership.
In so doing, respondent Judge actually heeded the clear warnings to the lower courts and
the Law Profession in general against mounting or abetting any attack against such
ownership. One such warning was that in Cañero v. University of the Philippines,24 as follows:

We strongly admonish courts and unscrupulous lawyers to stop entertaining spurious cases
seeking further to assail respondent UP’s title. These cases open the dissolute avenues of
graft to unscrupulous land-grabbers who prey like vultures upon the campus of respondent
UP. By such actions, they wittingly or unwittingly aid the hucksters who want to earn a quick
buck by misleading the gullible to buy the Philippine counterpart of the proverbial London
Bridge. It is well past time for courts and lawyers to cease wasting their time and resources
on these worthless causes and take judicial notice of the fact that respondent UP’s title had
already been validated countless times by this Court. Any ruling deviating from such doctrine
is to be viewed as a deliberate intent to sabotage the rule of law and will no longer be
countenanced.25

WHEREFORE, the Court DISMISSES the petition for certiorari and mandamus for lack of
merit; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.
G.R. No. 192463 July 13, 2015

OMAIRA LOMONDOT and SARIPA LOMONDOT, Petitioners,


vs.
HON. RASAD G BALINDONG, Presiding Judge, Shari'a District Court, 4th Shari'a
Judicial District, Marawi City, Lanao del Sur and AMBOG PANGANDAMUAN and
SIMBANATAO DIACA, Respondents.

DECISION

PERALTA, J.:

Before us is a petition for certiorari with prayer for the issuance of a writ of demolition
seeking to annul the Order1dated November 9, 2009 of the Shari'a District Court (SDC),
Fourth Shari'a Judicial District, Marawi City, issued in Civil Case No. 055-91, denying
petitioners' motion for the issuance of a writ of demolition, and the Orders2 dated January 5,
2010 and February 10, 2010 denying petitioners' first and second motions for
reconsideration, respectively.

The antecedent facts are as follows:

On August 16, 1991, petitioners Omaira and Saripa Lomondot filed with the SDC, Marawi
City, a complaint for recovery of possession and damages with prayer for mandatory
injunction and temporary restraining order against respondents Ambog Pangandamun
(Pangandamun) and Simbanatao Diaca (Diaca). Petitioners claimed that they are the owners
by succession of a parcel of land located at Bangon, Marawi City, consisting an area of
about 800 sq. meters; that respondent Pangandamun illegally entered and encroached 100
sq. meter of their land, while respondent Diaca occupied 200 sq. meters, as indicated in
Exhibits "A" and "K" submitted as evidence. Respondents filed their Answer arguing that they
are the owners of the land alleged to be illegally occupied. Trial thereafter ensued.

On January 31, 2005, the SDC rendered a Decision,3 the dispositive portion of which reads:
WHEREFORE, judgment is rendered as follows:

1. DECLARING plaintiffs owners of the 800 square meter land borrowed and turned
over by BPI and described in the complaint and Exhibits "A" and "K";

2. ORDERING defendants to VACATE the portions or areas they illegally


encroached as indicated in Exhibits "A" and "K" and to REMOVE whatever
improvements thereat introduced;

3. ORDERING defendants to jointly and severally pay plaintiffs (a) ₱50,000.00 as


moral damages; (b) ₱30,000.00 as exemplary damages; (C) ₱50,000.00 as
attorney's fees and the costs of the suit.

SO ORDERED4

Respondents filed an appeal5 with us and petitioners were required to file their Comment
thereto. In a Resolution6dated March 28, 2007, we dismissed the petition for failure of
respondents to sufficiently show that a grave abuse of discretion was committed by the SDC
as the decision was in accord with the facts and the applicable law and jurisprudence.
Respondents' motion for reconsideration was denied with finality on September 17,
2007.7 The SDC Decision dated January 31, 2005 became final and executory on October
31, 2007 and an entry of judgment8 was subsequently made.

Petitioners filed a motion9 for issuance of a writ of execution with prayer for a writ of
demolition.

On February 7, 2008, the SDC granted the motion10 for a writ of execution and the writ was
issued with the following fallo:

NOW THEREFORE, you are hereby commanded to cause the execution of the aforesaid
judgment. If defendants do not vacate the premises and remove the improvements, you must
secure a special order of the court to destroy, demolish or remove the improvements on the
property. The total amount awarded to and demanded by the prevailing party is ₱150,000.00
(damages, attorney's fees and the cost) which defendants must satisfy, pursuant to Section
8 (d) and (e), Rule 39, Rules of Court.11

The Sheriff then sent a demand letter12 to respondents for their compliance.

On February 3, 2009, petitioners filed a Motion13 for the Issuance of a Writ of Demolition to
implement the SDC Decision dated January 31, 2005. The motion was set for hearing.

On March 4, 2009, the SDC issued an Order14 reading as follows:

The plaintiffs, the prevailing party, filed a Motion for Writ of Demolition and the motion was
set for hearing on February 16, 2009. On this date, the plaintiffs, without counsel, appeared.
The defendants failed to appear. Thus, the court issued an order submitting the motion for
resolution. Resolution of the motion for issuance of a Writ of Demolition should be held in
abeyance. First, defendant Ambog Pangandamun has filed on February 6, 2009 an Urgent
Manifestation praying deferment of the hearing on the motion for writ of execution. Second,
Atty. Dimnatang T. Saro filed on February 13, 2009 a Notice of Appearance with Motion to
Postpone the hearing set on February 16, 2009 to study the records of the case as the
records are not yet in his possession. Third, the recent periodic report dated January 26,
2009 of the Sheriff shows Sultan Alioden of Kabasaran is negotiating the parties whereby the
defendant Ambog Pangandamun will be made to pay the five (5)-meter land of the plaintiffs
encroached by him and that what remains to be ironed out is the fixing of the amount.

WHEREFORE, the resolution on the Motion for Writ of Demolition is HELD IN ABEYANCE.
The Sheriff is DIRECTED to exert efforts to bring the parties back to the negotiating table
seeing to it that Sultan Alioden of Kabasaran is involved in the negotiation. Atty. Saro is
REQUIRED to file his comment on the motion for writ of execution within fifteen (15) days
from notice to guide the court in resolving the incident in the event the negotiation fails.

SO ORDERED.15

On May 5, 2009, the SDC issued another Order16 which held in abeyance the resolution of
the motion for issuance of a writ of demolition and granted an ocular inspection or actual
measurement of petitioners' 800-sq.-meter land.

The SDC issued another Order17 dated May 14, 2009, which stated, among others, that:
While the decision has become final and executory and a Writ of Execution has been issued,
there are instances when a Writ of Execution cannot be enforced as when there is a
supervening event that prevents the Sheriff to execute a Writ of Execution.

The defendants claimed they have not encroached as they have already complied with the
Writ of Execution and their buildings are not within the area claimed by the plaintiffs. This to
the Court is the supervening event, thus the order granting the request of Atty. Jimmy Saro,
counsel for the defendants, to conduct a survey to determine whether there is encroachment
or not. Thus, the Order dated May 5, 2009.

WHEREFORE, Engr. Hakim Laut Balt is hereby commissioned to conduct a survey of the
800 square meters claimed by the plaintiffs. Said Eng. Balt is given a period of one (1) month
from notice within which to conduct the survey in the presence of the parties.18

On November 9, 2009, the SDC issued the assailed Order19 denying petitioners' motion for
demolition. The Order reads in full:

It was on February 3, 2009 that the plaintiffs filed a Motion for Issuance of a Writ of
Demolition. The defendants filed their comment thereto on March 24, 2009. They prayed that
an ocular inspection and/or actual measurement of the 800 square meter land of the plaintiffs
be made which the court granted, in the greater interest of justice, considering that
defendants claimed to have complied with the writ of execution, hence there is no more
encroachment of plaintiffs’ land.

The intercession of concerned leaders to effect amicable settlement and the order to conduct
a survey justified the holding in abeyance of the resolution of the pending incident, motion for
writ of demolition.

After attempts for settlement failed and after the commissioned Geodetic Engineer to
conduct the needed survey asked for relief, plaintiffs asked anew for a writ of demolition.
Defendants opposed the grant of the motion, alleging compliance with the writ of execution,
and prayed for appointment of another Geodetic Engineer to conduct a survey and actual
measurement of plaintiffs' 800 square meter land.

At this point in time, the court cannot issue a special order to destroy, demolish or remove
defendants' houses, considering their claim that they no longer encroach any portion of
plaintiffs’ land.

Gleaned from Engineer Hakim Laut Balt's Narrative Report, he could have conducted the
required survey had not the plaintiffs dictated him where to start the survey.

WHERFORE, the motion for issuance of a writ of demolition is DENIED. A survey is still the
best way to find out if indeed defendants' houses are within plaintiffs' 800 square meter land.
Parties are, therefore, directed to choose and submit to the court their preferred Geodetic
Engineer to conduct the survey within ten (10) days from notice.20

Petitioners filed their motion for reconsideration which the SDC denied in an Order21 dated
January 5, 2010 saying that the motion failed to state the timeliness of the filing of said
motion and failed to comply with the requirements of notice of hearing. Petitioners' second
motion for reconsideration was also denied in an Order22 dated February10, 2010. The SDC
directed the parties to choose and submit their preferred Geodetic Engineer to conduct the
survey within 15 days from notice.
Undaunted, petitioners filed with the CA-Cagayan de Oro City a petition for certiorari
assailing the Orders issued by the SDC on November 9, 2009, January 5, 2010 and
February 10, 2010. In a Resolution23 dated April 27, 2010, the CA dismissed the petition for
lack of jurisdiction, saying, among others, that:

xxxx

In pursuing the creation of Shari'a Appellate Court, the Supreme Court En Banc even
approved A.M. No. 99-4-06, otherwise known as Resolution Authorizing the Organization of
the Shari'a Appellate Court.

However, the Shari'a Appellate Court has not yet been organized until the present. We, on
our part, therefore, cannot take cognizance of the instant case because it emanates from the
Shari'a Courts, which is not among those courts, bodies or tribunals enumerated under
Chapter 1, Section 9 of [Batas] Pambansa Bilang 129, as amended over which We can
exercise appellate jurisdiction. Thus, the instant Petition should be filed directly with the
Supreme Court.24 Petitioners filed the instant petition for certiorari assailing the SDC Orders,
invoking the following grounds:

RESPONDENT JUDGE, HONORABLE RASAD G. BALINDONG, COMMITTED GRAVE


ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF
JURISDICTION IN DENYING THE MOTION FOR ISSUANCE OF THE WRIT OF
DEMOLITION AFTERTHE WRIT OF EXECUTION ISSUED BY THE COURT COULD NOT
BE IMPLEMENTED AND INSTEAD DIRECT THE CONDUCT OF THE SURVEY.

RESPONDENT JUDGE HAD COMMITTED GRAVE ABUSE OF DISCRETION IN MAKING


IT APPEAR THAT HE WAS IN COURT AT HIS SALA IN MARAWI CITY LAST JANUARY
28, 2010 WHEN THE PARTIES WERE PRESENT AND HE WAS NOT THERE. 25

Preliminarily, we would deal with a procedural matter. Petitioners, after receipt of the SDC
Order denying their second motion for reconsideration of the Order denying their motion for
the issuance of a writ of demolition, filed a petition for certiorari with the CA. The CA
dismissed the petition for lack of jurisdiction in a Resolution dated April 27, 2010 saying that,
under RA 9054, it is the Shari’a Appellate Court (SAC) which shall exercise jurisdiction over
petition for certiorari; that, however, since SAC has not yet been organized, it cannot take
cognizance of the case as it emanates from the Shari’a Courts, which is not among those
courts, bodies or tribunals enumerated under Chapter 1, Section 9 of Batas Pambansa
Bilang 129, as amended, over which it can exercise appellate jurisdiction.

Under Republic Act No. 9054, An Act to Strengthen and Expand the Organic Act for the
Autonomous Region in Muslim Mindanao, amending for the purpose Republic Act No. 6734,
entitled, "An Act Providing for the Autonomous Region in Muslim Mindanao, as amended",
the Shari'a Appellate Court shall exercise appellate jurisdiction over petitions for certiorari of
decisions of the Shari'a District Courts. In Villagracia v. Fifth (5th) Shari’a District Court, 26 we
said:

x x x We call for the organization of the court system created under Republic Act No. 9054 to
effectively enforce the Muslim legal system in our country. After all, the Muslim legal system
– a legal system complete with its own civil, criminal, commercial, political, international, and
religious laws is part of the law of the land, and Shari’a courts are part of the Philippine
judicial system.
The Shari’a Appellate Court created under Republic Act No. 9054 shall exercise appellate
jurisdiction over all cases tried in the Shari’a District Courts. It shall also exercise original
1avv phi1

jurisdiction over petitions for certiorari, prohibition, mandamus, habeas corpus, and other
auxiliary writs and processes in aid of its appellate jurisdiction. The decisions of the Shari’a
Appellate Court shall be final and executory, without prejudice to the original and appellate
jurisdiction of this court.27

and

In Tomawis v. Hon. Balindong,28 we stated that:

x x x [t]he Shari’a Appellate Court has yet to be organized with the appointment of a
Presiding Justice and two Associate Justices. Until such time that the Shari’a Appellate Court
shall have been organized, however, appeals or petitions from final orders or decisions of the
SDC filed with the CA shall be referred to a Special Division to be organized in any of the CA
stations preferably composed of Muslim CA Justices.29

Notably, Tomawis case was decided on March 5, 2010, while the CA decision was rendered
on April 27, 2010. The CA's reason for dismissing the petition, i.e., the decision came from
SDC which the CA has no appellate jurisdiction is erroneous for failure to follow the Tomawis
ruling. However, we need not remand the case, as we have, on several occasions,30 passed
upon and resolved petitions and cases emanating from Shari’a courts.

Petitioners contend that their land was specific and shown by the areas drawn in Exhibits "A"
and "K" and by oral and documentary evidence on record showing that respondents have
occupied portions of their land, i.e., respondent Pangandamun's house encroached a 100
sq. meter portion, while respondent Diaca occupied 200 sq. meters; and that the SDC had
rendered a decision ordering respondents to vacate the portions or areas they had illegally
encroached as indicated in Exhibits "A" and "K" and to remove whatever improvements
thereat introduced. Such decision had already attained finality and a corresponding entry of
judgment had been made and a writ of execution was issued. Petitioners' claim that the
SDC's order for a conduct of a survey to determine whether respondents' land are within
petitioners' 800-sq.-meter land would, in effect, be amending a final and executory decision.

Only respondent Pangandamun filed his Comment, arguing that petitioners' motion for the
issuance of a writ of demolition has no factual and legal basis because his houses are clearly
outside the 800-sq.-meter land of petitioners; that his house had been constructed in 1964
within full view of the petitioners but none of them ever questioned the same.

We find for the petitioners.

The SDC Decision dated January31, 2005 ordered respondents to vacate the portions or
areas they had illegally encroached as indicated in Exhibits "A" and "K" and to remove
whatever improvements thereat introduced. Thus, petitioners had established that they are
recovering possession of 100 sq. meters of their land which was occupied by respondent
Pangandamun's house as indicated in Exhibit "K-1", and 200 sq. meter portion being
occupied by Diaca as indicated in Exhibit "K-2". Such decision had become final and
executory after we affirmed the same and an entry of judgment was made. Such decision
can no longer be modified or amended. In Dacanay v. Yrastorza, Sr.,31 we explained the
concept of a final and executory judgment, thus:
Once a judgment attains finality, it becomes immutable and unalterable. A final and
executory judgment may no longer be modified in any respect, even if the modification is
meant to correct what is perceived to be an erroneous conclusion of factor law and
regardless of whether the modification is attempted to be made by the court rendering it or
by the highest court of the land. This is the doctrine of finality of judgment. It is grounded on
fundamental considerations of public policy and sound practice that, at the risk of occasional
errors, the judgments or orders of courts must become final at some definite time fixed by
law. Otherwise, there will be no end to litigations, thus negating the main role of courts of
justice to assist in the enforcement of the rule of law and the maintenance of peace and
order by settling justiciable controversies with finality.32

However, the SDC later found that while the decision has become final and executory and a
writ of execution has been issued, there are instances when a writ of execution cannot be
enforced as when there is a supervening event that prevents the sheriff to execute the writ of
execution. It found that respondents' claim that their buildings are not within the area claimed
by petitioners is a supervening event and ordered a survey of the land, hence, denied the
motion for a writ of demolition.

We do not agree.

It is settled that there are recognized exceptions to the execution as a matter of right of a
final and immutable judgment, and one of which is a supervening event.

In Abrigo v. Flores,33 we said:

We deem it highly relevant to point out that a supervening event is an exception to the
execution as a matter of right of a final and immutable judgment rule, only if it directly affects
the matter already litigated and settled, or substantially changes the rights or relations of the
parties therein as to render the execution unjust, impossible or inequitable. A supervening
event consists of facts that transpire after the judgment became final and executory, or of
new circumstances that develop after the judgment attained finality, including matters that
the parties were not aware of prior to or during the trial because such matters were not yet in
existence at that time. In that event, the interested party may properly seek the stay of
execution or the quashal of the writ of execution, or he may move the court to modify or alter
the judgment in order to harmonize it with justice and the supervening event. The party who
alleges a supervening event to stay the execution should necessarily establish the facts by
competent evidence; otherwise, it would become all too easy to frustrate the conclusive
effects of a final and immutable judgment.34 In this case, the matter of whether respondents'
houses intruded petitioners' land is the issue in the recovery of possession complaint filed by
petitioners in the SDC which was already ruled upon, thus cannot be considered a
supervening event that would stay the execution of a final and immutable judgment. To allow
a survey as ordered by the SDC to determine whether respondents' houses are within
petitioners' land is tantamount to modifying a decision which had already attained finality.

We find that the SDC committed grave abuse of discretion when it denied petitioners' motion
for the issuance a writ of demolition. The issuance of a special order of demolition would
certainly be the necessary and logical consequence of the execution of the final and
immutable decision.35 Section 10(d) of Rule 39, Rules of Court provides:

Section 10. Execution of judgments for specific act. —

xxxx
(d) Removal of improvements on property subject of execution. - when the property subject
of the execution contains improvements constructed or planted by the judgment obligor or
his agent, the officer shall not destroy, demolish or remove said improvements except upon
special order of the court, issued upon motion of the judgment obligee after due hearing and
after the former has failed to remove the same within a reasonable time fixed by the court.

Notably, this case was decided in 2005 and its execution has already been delayed for years
now. It is almost trite to say that execution is the fruit and end of the suit and is the life of
law.36 A judgment, if left unexecuted, would be nothing but an empty victory for the prevailing
party.37

WHEREFORE, the petition is GRANTED. The Orders dated November 9, 2009, January 5,
2010 and February 10, 2010, of the Shari'a District Court, Fourth Shari'a Judicial District,
Marawi City are hereby CANCELLED and SET ASIDE. The Shari'a District Court is hereby
ORDERED to ISSUE a writ of demolition to enforce its Decision dated January 31, 2005 in
Civil Case No. 055-91.

Let a copy of this Decision be furnished the Presiding Justice of the Court of Appeals for
whatever action he may undertake in light of our pronouncement in the Tomawis v. Hon.
Balindong case quoted earlier on the creation of a Special Division to handle appeals or
petitions from trial orders or decisions of the Shari' a District Court.

SO ORDERED.
G.R. No. 193340

THE MUNICIPALITY OF TANGKAL, PROVINCE OF LANAO DEL NORTE, Petitioner,


vs.
HON. RASAD B. BALINDONG, in his capacity as Presiding Judge, Shari’a District
Court, 4th Judicial District, Marawi City, and HEIRS OF THE LATE MACALABO
ALOMPO, represented by SULTAN DIMNANG B. ALOMPO, Respondents.

DECISION

JARDELEZA, J.:

The Code of Muslim Personal Laws of the Philippines1 (Code of Muslim Personal Laws)
vests concurrent jurisdiction upon Shari'a district courts over personal and real actions
wherein the parties involved are Muslims, except those for forcible entry and unlawful
detainer. The question presented is whether the Shari'a District Court of Marawi City has
jurisdiction in an action for recovery of possession filed by Muslim individuals against a
municipality whose mayor is a Muslim. The respondent judge held that it has. We reverse.

The private respondents, heirs of the late Macalabo Alompo, filed a Complaint2 with the
Shari'a District Court of Marawi City (Shari'a District Court) against the petitioner,
Municipality of Tangkal, for recovery of possession and ownership of a parcel of land with an
area of approximately 25 hectares located at Barangay Banisilon, Tangkal, Lanao del Norte.
They alleged that Macalabo was the owner of the land, and that in 1962, he entered into an
agreement with the Municipality of Tangkal allowing the latter to "borrow" the land to pave
the way for the construction of the municipal hall and a health center building. The
agreement allegedly imposed a condition upon the Municipality of Tangkal to pay the value
of the land within 35 years, or until 1997; otherwise, ownership of the land would revert to
Macalabo. Private respondents claimed that the Municipality of Tangkal neither paid the
value of the land within the agreed period nor returned the land to its owner. Thus, they
prayed that the land be returned to them as successors-in-interest of Macalabo.

The Municipality of Tangkal filed an Urgent Motion to Dismiss3 on the ground of improper
venue and lack of jurisdiction. It argued that since it has no religious affiliation and represents
no cultural or ethnic tribe, it cannot be considered as a Muslim under the Code of Muslim
Personal Laws. Moreover, since the complaint for recovery of land is a real action, it should
have been filed in the appropriate Regional Trial Court of Lanao del Norte.

In its Order4 dated March 9, 2010, the Shari'a Distric.t Court denied the Municipality of
Tangkal's motion to dismiss. It held that since the mayor of Tangkal, Abdulazis A.M.
Batingolo, is a Muslim, the case "is an action involving Muslims, hence, the court has original
jurisdiction concurrently with that of regular/civil courts." It added that venue was properly
laid because the Shari' a District Court has territorial jurisdiction over the provinces of Lanao
del Sur and Lanao del Norte, in addition to the cities of Marawi and Iligan. Moreover, the
filing of a motion to dismiss is a disallowed pleading under the Special Rules of Procedure in
Shari'a Courts.5

The Municipality of Tangkal moved for reconsideration, which was denied by the Shari' a
District Court. The Shari' a District Court also ordered the Municipality of Tangkal to file its
answer within 10 days.6 The Municipality of Tangkal timely filed its answer7 and raised as an
affirmative defense the court's lack of jurisdiction.

Within the 60-day reglementary period, the Municipality of Tangkal elevated the case to us
via petition for certiorari, prohibition, and mandamus with prayer for a temporary restraining
order8 (TRO). It reiterated its arguments in its earlier motion to dismiss and answer that the
Shari' a District Court has no jurisdiction since one party is a municipality which has no
religious affiliation.

In their Comment,9 private respondents argue that under the Special Rules of Procedure in
Shari'a Courts, a petition for certiorari, mandamus, or prohibition against any interlocutory
order issued by the district court is a prohibited pleading. Likewise, the Municpality of
Tangkal' s motion to dismiss is disallowed by the rules. They also echo the reasoning of the
Shari' a District Court that since both the plaintiffs below and the mayor of defendant
municipality are Muslims, the Shari' a District Court has jurisdiction over the case.

In the meantime, we issued a TRO10 against the Shari'a District Court and its presiding judge,
Rasad Balindong, from holding any further proceedings in the case below.

II

In its petition, the Municipality of Tangkal acknowledges that generally, neither certiorari nor
prohibition is an available remedy to assail a court's interlocutory order denying a motion to
dismiss. But it cites one of the exceptions to the rule, i.e., when the denial is without or in
excess of jurisdiction to justify its remedial action. 11 In rebuttal, private respondents rely on
the Special Rules of Procedure in Shari' a Courts which expressly identifies a motion to
dismiss and a petition for certiorari, mandamus, or prohibition against any interlocutory order
issued by the court as prohibited pleadings.12

Although the Special Rules of Procedure in Shari' a Courts prohibits the filing of a motion to
dismiss, this procedural rule may be relaxed when the ground relied on is lack of jurisdiction
which is patent on the face of the complaint. As we held in Rulona-Al Awadhi v. Astih:13

Instead of invoking a procedural technicality, the respondent court should have recognized
its lack of jurisdiction over the parties and promptly dismissed the action, for, without
jurisdiction, all its proceedings would be, as they were, a futile and invalid exercise. A
summary rule prohibiting the filing of a motion to dismiss should not be a bar to the dismissal
of the action for lack of jurisdiction when the jurisdictional infirmity is patent on the face of the
complaint itself, in view of the fundamental procedural doctrine that the jurisdiction of a court
may be challenged at anytime and at any stage of the action. 14

Indeed, when it is apparent from the pleadings that the court has no jurisdiction over the
subject matter, it is duty-bound to dismiss the case regardless of whether the defendant filed
a motion to dismiss. 15 Thus, in Villagracia v. Fifth Shari'a District Court, 16 we held that once it
became apparent that the Shari'a court has no jurisdiction over the subject matter because
the defendant is not a Muslim, the court should have motu proprio dismissed the case.17

B
An order denying a motion to dismiss is an interlocutory order which neither terminates nor
finally disposes of a case as it leaves something to be done by the court before the case is
finally decided on the merits. Thus, as a general rule, the denial of a motion to dismiss
cannot be questioned in a special civil action for certiorari which is a remedy designed to
correct errors of jurisdiction and not errors of judgment. 18 As exceptions, however, the
defendant may avail of a petition for certiorari if the ground raised in the motion to dismiss is
lack of jurisdiction over the person of the defendant or over the subject matter, 19 or when the
denial of the motion to dismiss is tainted with grave abuse of discretion. 20

The reason why lack of jurisdiction as a ground for dismissal is treated differently from others
is because of the basic principle that jurisdiction is conferred by law, and lack of it affects the
very authority of the court to take cognizance of and to render judgment on the action21-to the
extent that all proceedings before a court without jurisdiction are void.22 We grant certiorari on
this basis. As will be shown below, the Shari'a District Court's lack of jurisdiction over the
subject matter is patent on the face of the complaint, and therefore, should have been
dismissed outright.

III

The matters over which Shari'a district courts have Jurisdiction are enumerated in the Code
of Muslim Personal Laws, specifically in Article 143.23 Consistent with the purpose of the law
to provide for an effective administration and enforcement of Muslim personal laws among
Muslims,24 it has a catchall provision granting Shari' a district courts original jurisdiction over
personal and real actions except those for forcible entry and unlawful detainer.25The Shari'a
district courts' jurisdiction over these matters is concurrent with regular civil
courts, i.e., municipal trial courts and regional trial courts.26 There is, however, a limit to the
general jurisdic;tion of Shari'a district courts over matters ordinarily cognizable by regular
courts: such jurisdiction may only be invoked if both parties are Muslims. If one party is not a
Muslim, the action must be filed before the regular courts. 27

The complaint below, which is a real action28 involving title to and possession of the land
situated at Barangay Banisilon, Tangkal, was filed by private respondents before the Shari' a
District Court pursuant to the general jurisdiction conferred by Article 143(2)(b). In
determining whether the Shari' a District Court has jurisdiction over the case, the threshold
question is whether both parties are Muslims. There is no disagreement that private
respondents, as plaintiffs below, are Muslims. The only dispute is whether the requirement is
satisfied because the mayor of the defendant municipality is also a Muslim. 1âwphi1

When Article 143(2)(b) qualifies the conferment of jurisdiction to actions "wherein the parties
involved are Muslims," the word "parties" necessarily refers to the real parties in interest.
Section 2 of Rule 3 of the Rules of Court defines real parties in interest as those who stand
to be benefited or injured by the judgment in the suit, or are entitled to the avails of the suit.
In this case, the parties who will be directly benefited or injured are the private respondents,
as real party plaintiffs, and the Municipality of Tangkal, as the real party defendant. In their
complaint, private respondents claim that their predecessor-in-interest, Macalabo, entered
into an agreement with the Municipality of Tangkal for the use of the land. Their cause of
action is based on the Municipality of Tangkal's alleged failure and refusal to return the land
or pay for its reasonable value in accordance with the agreement. Accordingly, they pray for
the return of the land or the payment of reasonable rentals thereon. Thus, a judgment in
favor of private respondents, either allowing them to recover possession or entitling them to
rentals, would undoubtedly be beneficial to them; correlatively, it would be prejudicial to the
Municipality of Tangkal which would either be deprived possession of the land on which its
municipal hall currently stands or be required to allocate funds for payment of rent.
Conversely, a judgment in favor of the Municipality of Tangkal would effectively quiet its title
over the land and defeat the claims of private respondents.

It is clear from the title and the averments in the complaint that Mayor Batingolo was
impleaded only in a representative capacity, as chief executive of the local government of
Tangkal. When an action is defended by a representative, that representative is not-and
neither does he become-a real party in interest. The person represented is deemed the real
party in interest;29 the representative remains to be a third party to the action.30 That Mayor
Batingolo is a Muslim is therefore irrelevant for purposes of complying with the jurisdictional
requirement under Article 143(2)(b) that both parties be Muslims. To satisfy the requirement,
it is the real party defendant, the Municipality of Tangkal, who must be a Muslim. Such a
proposition, however, is a legal impossibility.

The Code of Muslim Personal Laws defines a "Muslim" as "a person who testifies to the
oneness of God and the Prophethood of Muhammad and professes Islam."31 Although the
definition does not explicitly distinguish between natural and juridical persons, it nonetheless
connotes the exercise of religion, which is a fundamental personal right. 32 The ability to
testify to the "oneness of God and the Prophethood of Muhammad" and to profess Islam is,
by its nature, restricted to natural persons. In contrast, juridical persons are artificial beings
with "no consciences, no beliefs, no feelings, no thoughts, no desires."33 They are considered
persons only by virtue of legal fiction. The Municipality of Tangkal falls under this category.
Under the Local Government Code, a municipality is a body politic and corporate that
exercises powers as a political subdivision of the national government and as a corporate
entity representing the inhabitants of its territory. 34

Furthermore, as a government instrumentality, the Municipality of Tangkal can only act for
secular purposes and in ways that have primarily secular effects35-consistent with the non-
establishment clause. 36 Hence, even if it is assumed that juridical persons are capable of
practicing religion, the Municipality of Tangkal is constitutionally proscribed from adopting,
much less exercising, any religion, including Islam.

The Shari' a District Court appears to have understood the foregoing principles, as it
conceded that the Municipality of Tangkal "is neither a Muslim nor a Christian."37 Yet it still
proceeded to attribute the religious affiliation of the mayor to the municipality. This is
manifest error on the part of the Shari' a District Court. It is an elementary principle that a
municipality has a personality that is separate and distinct from its mayor, vice-
mayor, sanggunian, and other officers composing it.38 And under no circumstances can this
corporate veil be pierced on purely religious considerations-as the Shari' a District Court has
done-without running afoul the inviolability of the separation of Church and State enshrined
in the Constitution. 39

In view of the foregoing, the Shari' a District Court had no jurisdiction under the law to decide
private respondents' complaint because not all of the parties involved in the action are
Muslims. Since it was clear from the complaint that the real party defendant was the
Municipality of Tangkal, the Shari'a District Court should have simply applied the basic
doctrine of separate juridical personality and motu proprio dismissed the case.

WHEREFORE, the petition is GRANTED. The assailed orders of the Shari'a District Court of
Marawi City in Civil Case No. 201-09 are REVERSED and SET ASIDE. Accordingly, Civil
Case No. 201-09 is DISMISSED. SO ORDERED.
G.R. No. 198172

REGULUS DEVELOPMENT, INC., Petitioner,


vs.
ANTONIO DELA CRUZ, Respondent.

DECISION

BRION, J.:

Before us is a petition for review on certiorari filed by petitioner Regulus Development,


Inc. (petitioner) to challenge the November 23, 2010 Decision1 and August 10, 2011
resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 105290. CA Associate Justice
Juan Q. Enriquez, Jr. penned the rulings, concurred in by Associate Justices Ramon M.
Bato, Jr. and Fiorito S. Macalino.

ANTECEDENT FACTS

The petitioner is the owner of an apartment (San Juan Apartments) located at San Juan
Street, Pasay City. Antonio dela Cruz (respondent) leased two units (Unit 2002-A and Unit
2002-B) of the San Juan Apartments in 1993 and 1994. The contract of lease for each of the
two units similarly provides a lease period of one (1) month, subject to automatic renewals,
unless terminated by the petitioner upon written notice.

The petitioner sent the respondent a letter to terminate the lease of the two subject units.
Due to the respondent’s refusal to vacate the units, the petitioner filed a complaint3 for
ejectment before the Metropolitan Trial Court (MTC) of Pasay City, Manila, on May 1, 2001.

The MTC resolved the case in the petitioner’s favor and ordered the respondent to vacate
the premises, and pay the rentals due until the respondent actually complies.4

The respondent appealed to the Regional Trial Court (RTC). Pending appeal, the respondent
consigned the monthly rentals to the RTC due to the petitioner’s refusal to receive the
rentals.

The RTC affirmed5 the decision of the MTC in toto and denied the motion for
reconsideration filed by the respondent.

CA-G.R. SP No. 69504: Dismissal of Ejectment Case

In a Petition for Review filed by the respondent, the CA reversed the lower courts’
decisions and dismissed the ejectment case.6 On March 19, 2003, the dismissal of the
case became final and executory.7

Orders dated July 25, 2003 and November 28, 2003 for payment of rentals due under
lease contracts

The petitioner filed a motion (to withdraw funds deposited by the defendant-appellant as
lessee)8 praying for the withdrawal of the rentals consigned by the respondent with the RTC.
In an order dated July 25, 2003,9 the RTC granted the petitioner’s motion. The RTC
explained that the effect of the complaint’s dismissal would mean that there was no
complaint filed at all. The petitioner, however, is entitled to the amount of rentals for the use
and occupation of the subject units, as provided in the executed contracts of lease and on
the basis of justice and equity.

The court denied the respondent’s motion for reconsideration10 in an order dated November
28, 2003.11

On the petitioner’s motion, the RTC issued a writ of execution on December 18, 2003, to
cause the enforcement of its order dated July 25, 2003.12

CA-G.R. SP No. 81277: Affirmed RTC Orders

The respondent filed a petition for certiorari under Rule 65 before the CA to assail the RTC
Orders dated July 25, 2003 and November 28, 2003 (RTC orders), which granted the
petitioner’s motion to withdraw funds.

The CA dismissed13 the petition and held that the assailed RTC Orders were issued
pursuant to its equity jurisdiction, in accordance with Section 5, Rule 39,14 and Rules
515 and 616 of Rule 135 of the Rules of Court. The respondent’s motion for reconsideration
was similarly denied.

G.R. SP No. 171429: Affirmed CA Ruling on RTC Orders

The respondent filed a petition for review on certiorari before this Court to assail the decision
of the CA in CA-G.R. SP No. 81277. In a resolution dated June 7, 2006,17 we denied the
petition for insufficiency in form and for failure to show any reversible error committed by the
CA.

Our resolution became final and executory and an entry of judgment18 was issued.

Execution of RTC Orders

The petitioner returned to the RTC and moved for the issuance of a writ of execution to allow
it to proceed against the supersedeas bond the respondent posted, representing rentals for
the leased properties from May 2001 to October 2001, and to withdraw the lease payments
deposited by respondent from November 2001 until August 2003.19 The RTC granted the
motion.20

The RTC issued an Alias Writ of Execution21 dated April 26, 2007, allowing the withdrawal of
the rental deposits and the value of the supersedeas bond.

The petitioner claimed that the withdrawn deposits, supersedeas bond, and payments
directly made by the respondent to the petitioner, were insufficient to cover rentals due for
the period of May 2001 to May 2004. Hence, the petitioner filed a manifestation and
motion22 dated October 23, 2007, praying that the RTC levy upon the respondent’s property
covered by Transfer Certificate of Title (TCT) No. 136829 to satisfy the judgment credit.
The RTC granted the petitioner’s motion in an order dated June 30, 2008.23 The respondent
filed a motion for reconsideration which was denied by the RTC in an order dated August
26, 2008.24

CA-G.R. SP No. 105290: Assailed the levy of the respondent’s property

On October 3, 2008, the respondent filed with the CA a Petition for Certiorari 25 with
application for issuance of a temporary restraining order. The petition sought to nullify and
set aside the orders of the RTC directing the levy of the respondent’s real property. The CA
dismissed the petition. Thereafter, the respondent filed a motion for reconsideration26 dated
November 3, 2008.

Pursuant to the order dated June 30, 2008, a public auction for the respondent’s property
covered by TCT No. 136829 was held on November 4, 2008,27 where the petitioner was
declared highest bidder. Subsequently, the Certificate of Sale28 in favor of the petitioner was
registered.

Meanwhile, on January 7, 2010, the respondent redeemed the property with the RTC Clerk
of Court, paying the equivalent of the petitioner’s bid price with legal interest. The petitioner
filed a motion to release funds29 for the release of the redemption price paid. The RTC
granted30 the motion.

On February 12, 2010, the respondent filed a manifestation and motion31 before the CA to
withdraw the petition for the reason that the redemption of the property and release of the
price paid rendered the petition moot and academic.

Thereafter, the petitioner received the CA decision dated November 23, 2010, which
reversed and set aside the orders of the RTC directing the levy of the respondent’s property.
The CA held that while the approval of the petitioner’s motion to withdraw the consigned
rentals and the posted supersedeas bond was within the RTC’s jurisdiction, the RTC had no
jurisdiction to levy on the respondent’s real property.

The CA explained that the approval of the levy on the respondent’s real property could not
be considered as a case pending appeal, because the decision of the MTC had already
become final and executory. As such, the matter of execution of the judgment lies with the
MTC where the complaint for ejectment was originally filed and presented.

The CA ordered the RTC to remand the case to the MTC for execution. The petitioner filed
its motion for reconsideration which was denied32 by the CA.

THE PETITION

The petitioner filed the present petition for review on certiorari to challenge the CA ruling
in CA-G.R. SP No. 105290 which held that the RTC had no jurisdiction to levy on the
respondent’s real property.

The petitioner argues: first, that the RTC’s release of the consigned rentals and levy were
ordered in the exercise of its equity jurisdiction; second, that the respondent’s petition in CA-
G.R. SP No. 105290 was already moot and academic with the conduct of the auction sale
and redemption of the respondent’s real property; third, that the petition in CAG. R. SP No.
105290 should have been dismissed outright for lack of signature under oath on the
Verification and Certification against Forum Shopping.

The respondent duly filed its comment33 and refuted the petitioner’s arguments. On
the first argument, respondent merely reiterated the CA’s conclusion that the RTC had no
jurisdiction to order the levy on respondent’s real property as it no longer falls under the
allowed execution pending appeal. On the second argument, the respondent contended that
the levy on execution and sale at public auction were null and void, hence the CA decision is
not moot and academic. On the third argument, the respondent simply argued that it was too
late to raise the alleged formal defect as an issue.

THE ISSUE

The petitioner poses the core issue of whether the RTC had jurisdiction to levy on the
respondent’s real property.

OUR RULING

We grant the petition.

Procedural issue: Lack of notarial seal on the Verification and Certification against
Forum Shopping is not fatal to the petition.

The petitioner alleged that the assailed CA petition should have been dismissed since the
notary public failed to affix his seal on the attached Verification and Certification against
Forum Shopping.

We cannot uphold the petitioner’s argument.

The lack of notarial seal in the notarial certificate34 is a defect in a document that is required
to be executed under oath.

Nevertheless, a defect in the verification does not necessarily render the pleading fatally
defective. The court may order its submission or correction, or act on the pleading if the
attending circumstances are such that strict compliance with the Rule may be dispensed with
in order that the ends of justice may be served.35

Noncompliance or a defect in a certification against forum shopping, unlike in the case of a


verification, is generally not curable by its subsequent submission or correction, unless the
covering Rule is relaxed on the ground of "substantial compliance" or based on the presence
of "special circumstances or compelling reasons."36 Although the submission of a certificate
against forum shopping is deemed obligatory, it is not however jurisdictional.37

In the present case, the Verification and Certification against Forum Shopping were in fact
submitted. An examination of these documents shows that the notary public’s signature and
stamp were duly affixed. Except for the notarial seal, all the requirements for the verification
and certification documents were complied with.

The rule is that courts should not be unduly strict on procedural lapses that do not really
impair the proper administration of justice. The higher objective of procedural rules is to
ensure that the substantive rights of the parties are protected. Litigations should, as much as
possible, be decided on the merits and not on technicalities. Every party-litigant must be
afforded ample opportunity for the proper and just determination of his case, free from the
unacceptable plea of technicalities.38

The CA correctly refused to dismiss and instead gave due course to the petition as it
substantially complied with the requirements on the Verification and Certification against
Forum Shopping.

An issue on jurisdiction prevents the petition from becoming "moot and academic."

The petitioner claims that the assailed CA petition should have been dismissed because the
subsequent redemption of the property by the respondent and the release of the price paid to
the petitioner rendered the case moot and academic.

A case or issue is considered moot and academic when it ceases to present a justiciable
controversy because of supervening events, rendering the adjudication of the case or the
resolution of the issue without any practical use or value.39 Courts generally decline
jurisdiction over such case or dismiss it on the ground of mootness except when, among
others, the case is capable of repetition yet evades judicial review.40

The CA found that there is an issue on whether the RTC had jurisdiction to issue the orders
directing the levy of the respondent’s property. The issue on jurisdiction is a justiciable
controversy that prevented the assailed CA petition from becoming moot and academic.

It is well-settled in jurisprudence that jurisdiction is vested by law and cannot be conferred or


waived by the parties. "Even on appeal and even if the reviewing parties did not raise the
issue of jurisdiction, the reviewing court is not precluded from ruling that the lower court had
no jurisdiction over the case."41

Even assuming that the case has been rendered moot due to the respondent’s redemption of
the property, the CA may still entertain the jurisdictional issue since it poses a situation
capable of repetition yet evading judicial review.

Under this perspective, the CA correctly exercised its jurisdiction over the petition.

Equity jurisdiction versus appellate jurisdiction of the RTC

The appellate jurisdiction of courts is conferred by law. The appellate court acquires
jurisdiction over the subject matter and parties when an appeal is perfected.42

On the other hand, equity jurisdiction aims to provide complete justice in cases where a court
of law is unable to adapt its judgments to the special circumstances of a case because of a
resulting legal inflexibility when the law is applied to a given situation. The purpose of the
exercise of equity jurisdiction, among others, is to prevent unjust enrichment and to ensure
restitution.43

The RTC orders which allowed the withdrawal of the deposited funds for the use and
occupation of the subject units were issued pursuant to the RTC’s equity jurisdiction, as the
CA held in the petition docketed as CA-G.R. SP No. 81277.
The RTC’s equity jurisdiction is separate and distinct from its appellate jurisdiction on the
ejectment case. The RTC could not have issued its orders in the exercise of its appellate
jurisdiction since there was nothing more to execute on the dismissed ejectment case. As the
RTC orders explained, the dismissal of the ejectment case effectively and completely blotted
out and cancelled the complaint. Hence, the RTC orders were clearly issued in the exercise
of the RTC’s equity jurisdiction, not on the basis of its appellate jurisdiction.

This Court takes judicial notice44 that the validity of the RTC Orders has been upheld in a
separate petition before this Court, under G.R. SP No. 171429 entitled Antonio Dela Cruz v.
Regulus Development, Inc.

The levy of real property was ordered by the RTC in the exercise of its equity
jurisdiction.

The levy of the respondent’s property was made pursuant to the RTC orders issued in the
exercise of its equity jurisdiction, independent of the ejectment case originally filed with the
MTC.

An examination of the RTC order dated June 30, 2008, directing the levy of the respondent’s
real property shows that it was based on the RTC order dated July 25, 2003. The levy of the
respondent’s property was issued to satisfy the amounts due under the lease contracts, and
not as a result of the decision in the ejectment case.

The CA erred when it concluded that the RTC exercised its appellate jurisdiction in the
ejectment case when it directed the levy of the respondent’s property.

Furthermore, the order to levy on the respondent’s real property was consistent with the first
writ of execution issued by the RTC on December 18, 2003, to implement the RTC orders.
The writ of execution states that:

xxx In case of [sic] sufficient personal property of the defendant cannot be found whereof to
satisfy the amount of the said judgment, you are directed to levy [on] the real property of
said defendant and to sell the same or so much thereof in the manner provided by law
for the satisfaction of the said judgment and to make return of your proceedings together
with this Writ within sixty (60) days from receipt hereof. (emphasis supplied)

The subsequent order of the RTC to levy on the respondent’s property was merely a
reiteration and an enforcement of the original writ of execution issued. 1âwphi 1

Since the order of levy is clearly rooted on the RTC Orders, the only question that needs to
be resolved is which court has jurisdiction to order the execution of the RTC orders.

The RTC, as the court of origin, has jurisdiction to order the levy of the respondent's
real property.

Execution shall be applied for in the court of origin, in accordance with Section 1, 45 Rule 39 of
the Rules of Court.

The court of origin with respect to the assailed RTC orders is the court which issued these
orders. The RTC is the court with jurisdiction to order the execution of the issued RTC
orders.
Hence, the petitioner correctly moved for the issuance of the writ of execution and levy of the
respondent's real property before the RTC as the court of origin.

WHEREFORE, we hereby GRANT the petition for review on certiorari. The decision dated
November 23, 2010, and the resolution dated August 10, 2011, of the Court of Appeals in
CA-G.R. SP No. 105290 are hereby REVERSED and SET ASIDE. The orders dated June
30, 2008, and August 26, 2008, of Branch 108 of the Regional Trial Court of Pasay City, are
hereby REINSTATED. Costs against respondent Antonio dela Cruz.

SO ORDERED.
G.R. No. 167702 March 20, 2009

LOURDES L. ERISTINGCOL, Petitioner,


vs.
COURT OF APPEALS and RANDOLPH C. LIMJOCO, Respondents.

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court which assails
the Court of Appeals (CA) Decision1 in CA-G.R. SP. No. 64642 dismissing Civil Case No. 99-
297 before the Regional Trial Court (RTC) for lack of jurisdiction.

The facts, as narrated by the CA, are simple.

[Petitioner Lourdes] Eristingcol is an owner of a residential lot in Urdaneta Village (or


"village"), Makati City and covered by Transfer Certificate of Title No. 208586. On the other
hand, [respondent Randolph] Limjoco, [Lorenzo] Tan and [June] Vilvestre were the former
president and chairman of the board of governors (or "board"), construction committee
chairman and village manager of [Urdaneta Village Association Inc.] UVAI, respectively.
UVAI is an association of homeowners at Urdaneta Village.

[Eristingcol’s] action [against UVAI, Limjoco, Tan and Vilvestre] is founded on the allegations
that in compliance with the National Building Code and after UVAI’s approval of her building
plans and acceptance of the construction bond and architect’s fee, Eristingcol started
constructing a house on her lot with "concrete canopy directly above the main door and
highway"; that for alleged violation of its Construction Rules and Regulations (or "CRR") on
"Set Back Line" vis-a-vis the canopy easement, UVAI imposed on her a penalty of
₱400,000.00 and barred her workers and contractors from entering the village and working
on her property; that the CRR, particularly on "Set Back Line," is contrary to law; and that the
penalty is unwarranted and excessive.

On February 9, 1999, or a day after the filing of the complaint, the parties reached a
temporary settlement whereby UVAI, Limjoco, Tan and Vilvestre executed an undertaking
which allowed Eristingcol’s workers, contractors and suppliers to leave and enter the village,
subject only to normal security regulations of UVAI.

On February 26, 1999, UVAI, Limjoco, Tan and Vilvestre filed a motion to dismiss on ground
of lack of jurisdiction over the subject matter of the action. They argued that it is the Home
Insurance Guaranty Corporation (or "HIGC")2which has jurisdiction over intra-corporate
disputes involving homeowners associations, pursuant to Exec. Order No. 535, Series of
1979, as amended by Exec. Order No. 90, Series of 1986.

Opposing the motion, Eristingcol alleged, among others, that UVAI, Limjoco, Tan and
Vilvestre did not comply with the mandatory provisions of Secs. 4 and 6, Rule 15 of the 1997
Rules of Civil Procedure and are estopped from questioning the jurisdiction of the [RTC] after
they voluntarily appeared therein "and embraced its authority by agreeing to sign an
Undertaking."
On May 20, 1999, Eristingcol filed an amended complaint by (i) impleading Manuel Carmona
(or "Carmona") and Rene Cristobal (or "Cristobal"), UVAI’s newly-elected president and
chairman of the board and newly-designated construction committee chairman, respectively,
as additional defendants and (ii) increasing her claim for moral damages against each
petitioner from ₱500,000.00 to ₱1,000,000.00.

On May 25, 1999, Eristingcol filed a motion for production and inspection of documents,
which UVAI, Limjoco, Tan, Vilvestre, Carmona and Cristobal opposed. The motion sought to
compel [UVAI and its officers] to produce the documents used by UVAI as basis for the
imposition of the ₱400,000.00 penalty on Eristingcol as well as letters and documents
showing that UVAI had informed the other homeowners of their violations of the CRR.

On May 26, 1999, the [RTC] issued an order which pertinently reads:

IN VIEW OF THE FOREGOING, for lack of merit, the defendants’ Motion to Dismiss is
Denied, and plaintiff’s motion to declare defendants in default and for contempt are also
Denied."

The [RTC] ratiocinated that [UVAI, Limjoco, Tan and Vilvestre] may not assail its jurisdiction
"after they voluntarily entered their appearance, sought reliefs therein, and embraced its
authority by agreeing to sign an undertaking to desist from prohibiting (Eristingcol’s) workers
from entering the village." In so ruling, it applied the doctrine enunciated in Tijam v.
Sibonghanoy.

On June 7, 1999, Eristingcol filed a motion reiterating her earlier motion for production and
inspection of documents.

On June 8, 1999, [UVAI, Limjoco, Tan and Vilvestre] moved for partial reconsideration of the
order dated May 26, 1999. Eristingcol opposed the motion.

On March 24, 2001, the [RTC] issued an order granting Eristingcol’s motion for production
and inspection of documents, while on March 26, 2001, it issued an order denying [UVAI’s,
Limjoco’s, Tan’s and Vilvestre’s] motion for partial reconsideration.

On May 10, 2001, [UVAI, Limjoco, Tan and Vilvestre] elevated the dispute before [the CA]
via [a] petition for certiorari alleging that the [RTC] acted without jurisdiction in issuing the
orders of May 26, 1999 and March 24 and 26, 2001.3

The CA issued the herein assailed Decision reversing the RTC Order4 and dismissing
Eristingcol’s complaint for lack of jurisdiction.

Hence, this appeal positing a sole issue for our resolution:

Whether it is the RTC or the Housing and Land Use Regulatory Board (HLURB) which has
jurisdiction over the subject matter of Eristingcol’s complaint.

Before anything else, we note that the instant petition impleads only Limjoco as private
respondent. The rest of the defendants sued by Eristingcol before the RTC, who then
collectively filed the petition for certiorari before the CA assailing the RTC’s Order, were,
curiously, not included as private respondents in this particular petition.
Eristingcol explains that only respondent Limjoco was retained in the instant petition as her
discussions with UVAI and the other defendants revealed their lack of participation in the
work-stoppage order which was supposedly single-handedly thought of and implemented by
Limjoco.

The foregoing clarification notwithstanding, the rest of the defendants should have been
impleaded as respondents in this petition considering that the complaint before the RTC,
where the petition before the CA and the instant petition originated, has yet to be amended.
Furthermore, the present petition maintains that it was serious error for the CA to have ruled
that the RTC did not have jurisdiction over a complaint for declaration of nullity of UVAI’s
Construction Rules. Clearly, UVAI and the rest of the defendants should have been
impleaded herein as respondents.

Section 4(a), Rule 45 of the Rules of Court, requires that the petition shall "state the full
name of the appealing party as petitioner and the adverse party as respondent, without
impleading the lower courts or judges thereof either as petitioners or respondents." As the
losing party in defendants’ petition for certiorari before the CA, Eristingcol should have
impleaded all petitioners, the winning and adverse parties therein.

On this score alone, the present petition could have been dismissed outright.5 However, to
settle the issue of jurisdiction, we have opted to dispose of this case on the merits.

Despite her having dropped UVAI, Lorenzo Tan (Tan) and June Vilvestre (Vilvestre) from this
suit, Eristingcol insists that her complaint against UVAI and the defendants was properly filed
before the RTC as it prays for the declaration of nullity of UVAI’s Construction Rules and
asks that damages be paid by Limjoco and the other UVAI officers who had inflicted injury
upon her. Eristingcol asseverates that since the case before the RTC is one for declaration
of nullity, the nature of the question that is the subject of controversy, not just the status or
relationship of the parties, should determine which body has jurisdiction. In any event,
Eristingcol submits that the RTC’s jurisdiction over the case was foreclosed by the prayer of
UVAI and its officers, including Limjoco, for affirmative relief from that court.

Well-settled in jurisprudence is the rule that in determining which body has jurisdiction over a
case, we should consider not only the status or relationship of the parties, but also the nature
of the question that is the subject of their controversy.6 To determine the nature of an action
and which court has jurisdiction, courts must look at the averments of the complaint or
petition and the essence of the relief prayed for.7 Thus, we examine the pertinent allegations
in Eristingcol’s complaint, specifically her amended complaint, to wit:

Allegations Common to All Causes of Action

3. In 1958 and upon its incorporation, [UVAI] adopted a set of By-laws and Rules and
Regulations, x x x. Item 5 of [UVAI’s] Construction Rules pertinently provides:

"Set back line: All Buildings, including garage servants’ quarters, or parts thereof (covered
terraces, portes cocheres) must be constructed at a distance of not less than three (3)
meters from the boundary fronting a street and not less than four (4) meters fronting the
drainage creek or underground culvert and two (2) meters from other boundaries of a lot.
Distance will be measured from the vertical projection of the roof nearest the property line.
Completely open and unroofed terraces are not included in these restrictions."
Suffice it to state that there is nothing in the same By-laws which deals explicitly with
canopies or marquees which extend outward from the main building.

4. [Eristingcol] has been a resident of Urdaneta Village for eleven (11) years. In February
1997, she purchased a parcel of land in the Village, located at the corner of Urdaneta
Avenue and Cerrada Street. x x x.

5. In considering the design for the house (the "Cerrada property") which she intended to
construct on Cerrada Street, [Eristingcol] referred to the National Building Code of the
Philippines. After assuring herself that the said law does not expressly provide any
restrictions in respect thereof, and after noting that other houses owned by prominent
families had similar structures without being cited by the Village’s Construction Committee,
[Eristingcol] decided that the Cerrada property would have a concrete canopy directly above
the main door and driveway.

6. In compliance with [UVAI’s] rules, [Eristingcol] submitted to [UVAI] copies of her building
plans in respect of the Cerrada property and the building plans were duly approved by
[UVAI]. x x x.

7. [Eristingcol] submitted and/or paid the "cash bond/construction bond deposit and
architect’s inspection fee" of ₱200,000.00 and the architect’s inspection fee of ₱500.00 as
required under Construction Rules x x x.

8. In the latter part of 1997, and while the construction of the Cerrada property was ongoing,
[Eristingcol] received a notice from [UVAI], charging her with alleged violations of the
Construction Rules, i.e., those on the height restriction of eleven (11.0) meters, and the
canopy extension into the easement. On 22nd January 1998, [Eristingcol] (through her
representatives) met with, among others, defendant Limjoco. In said meeting, and after
deliberation on the definition of the phrase "original ground elevation" as a reference point,
[Eristingcol’s] representatives agreed to revise the building plan by removing what was
intended to be a parapet or roof railing, and thereby reduce the height of the structure by 40
centimeters, which proposal was accepted by the Board through defendant Limjoco, Gov.
Catalino Macaraig Jr. ([UVAI’s] Construction Committee chairman), and the Village’s
Architect. However, the issue of the alleged violation in respect of the canopy/extension
remained unresolved.

xxxx

9. In compliance with the agreement reached at the 22nd January 1998 meeting, [Eristingcol]
caused the revision of her building plans such that, as it now stands, the Cerrada property
has a vertical height of 10.96 meters and, thus, was within the Village’s allowed maximum
height of 11 meters.

10. Sometime in June 1998, [Eristingcol] was surprised to receive another letter from [UVAI],
this time from the Construction Committee chairman (defendant Tan), again calling her
attention to alleged violations of the Construction Rules. On 15th June 1998, [UVAI] barred
[Eristingcol’s] construction workers from entering the Village. Thus, [Eristingcol’s]
Construction Manager (Mr. Jaime M. Hidalgo) wrote defendant Tan to explain her position,
and attached photographs of similar "violations" by other property owners which have not
merited the same scrutiny and sanction from [UVAI].

xxxx
11. On 26th October 1998, and for reasons known only to him, defendant Vilvestre sent a
letter to Mr. Geronimo delos Reyes, demanding for an "idea of how [Mr. delos Reyes] can
demonstrate in concrete terms [his] good faith as a quid pro quo for compromise to" [UVAI’s]
continued insistence that [Eristingcol] had violated [UVAI’s] Construction Rules. x x x.

xxxx

12. [Eristingcol] through Mr. Hidalgo sent a letter dated 24th November 1998 to defendant
Tan, copies of which were furnished defendants Limjoco, Vilvestre and the Board, reiterating
that, among others: (i) the alleged height restriction violation is untrue, since the Cerrada
property now has a height within the limits imposed by [UVAI]; and (ii) the demand to reduce
the canopy by ninety (90) centimeters is without basis, in light of the existence of thirty-five
(35) similar "violations" of the same nature by other homeowners. [Eristingcol] through Mr.
Hidalgo further mentioned that she had done nothing to deserve the crude and coercive
Village letters and the Board’s threats of work stoppage, and she cited instances when she
dealt with [UVAI] and her fellow homeowners in good faith and goodwill such as in 1997,
when she very discreetly spent substantial amounts to landscape the entire Village Park,
concrete the Park track oval which was being used as a jogging path, and donate to the
Association molave benches used as Park benches.

xxxx

13. On the same date (24th November 1998), defendant Vilvestre sent another letter
addressed to [Eristingcol’s] construction manager Hidalgo, again threatening to enjoin all
construction activity on the Cerrada property as well as ban entry of all workers and
construction deliveries effective 1st December 1998 unless Mr. delos Reyes met with
defendants. x x x.

xxxx

14. On 2nd December 1998, [Eristingcol’s] representatives met with defendants Limjoco,
Tan, and Vilvestre. During that meeting, defendants were shown copies of the architectural
plans for the Cerrada property. [Eristingcol’s] representatives agreed to allow [UVAI’s]
Construction Committee’s architect to validate the measurements given. However, on the
issue of the canopy extension, the defendants informed [Eristingcol’s] representatives that
the Board would impose a penalty of Four Hundred Thousand Pesos (₱400,000.00) for
violation of [UVAI’s] "set back" or easement rule. Defendants cited the Board’s imposition of
similar fines to previous homeowners who had violated the same rule, and they undertook to
furnish [Eristingcol] with a list of past penalties imposed and paid by homeowners found by
the Board to have violated the Village’s "set back" provision.

15. On 22nd December 1998, defendant Vilvestre sent [Eristingcol] a letter dated 18th
December 1998 formally imposing a penalty of ₱400,000.00 for the "canopy easement
violation." x x x.

16. On 29th December 1998, x x x, Vilvestre sent a letter to [Eristingcol], stating that "as far
as [his] administration is concerned, there has been no past penalties executed by [UVAI],
similar to the one we are presently demanding on your on going construction. x x x

17. On 4th January 1999, [Eristingcol’s] representative sent a letter to the Board, asking for a
reconsideration of the imposition of the ₱400,000.00 penalty on the ground that the same is
unwarranted and excessive. On 6th January 1999, [Eristingcol] herself sent a letter to the
Board, expounding on the reasons for opposing the Board’s action. On 18th January 1999,
[Eristingcol] sent another letter in compliance with defendants’ request for a breakdown of
her expenditures in respect of her donations relative to the Village park.

18. On 3rd February 1999, [Eristingcol] through her lawyers sent defendants a letter,
requesting that her letters of 4th and 6th January 1999 be acted upon.

19. On 4th February 1999, x x x, defendant Limjoco gave a verbal order to [UVAI’s] guards to
bar the entry of workers working on the Cerrada property.

20. In the morning of 5th February 1999, defendants physically barred [Eristingcol’s] workers
and contractors from entering the Village and working at the Cerrada property.8

Eristingcol then lists the following causes of action:

1. Item 5 of UVAI’s Construction Rules constitutes an illegal and unwarranted


intrusion upon Eristingcol’s proprietary rights as it imposes a set-back or horizontal
easement of 3.0 meters from the property line greater than the specification in
Section 1005(b) of the Building Code that "the horizontal clearance between the
outermost edge of the marquee and the curb line shall be not less than 300
millimeters." As such, Eristingcol prays for the declaration of nullity of this provision in
UVAI’s Construction Rules insofar as she is concerned.

2. UVAI’s imposition of a ₱400,000.00 penalty on Eristingcol has no factual basis, is


arbitrary, whimsical and capricious as rampant violations of the set-back rule by other
homeowners in the Village were not penalized by UVAI. Eristingcol prays to put a
stop to defendants’ arbitrary exercise of power pursuant to UVAI’s by-laws.

3. Absent any factual or legal bases for the imposition of a ₱400,000.00 penalty,
defendants and all persons working under their control should be permanently barred
or restrained from imposing and/or enforcing any penalty upon Eristingcol for an
alleged violation of UVAI’s Construction Rules, specifically the provision on set-back.

4. Defendants Limjoco, Tan, and Vilvestre, in violation of Article 19 of the Civil Code,
demonstrated bias against Eristingcol by zeroing in on her alone and her supposed
violation, while other homeowners, who had likewise violated UVAI’s Construction
Rules, were not cited or penalized therefor. Defendants’ actuations were in clear
violation of their duty to give all homeowners, including Eristingcol, their due.

5. Defendants’ actuations have seriously affected Eristingcol’s mental disposition and


have caused her to suffer sleepless nights, mental anguish and serious anxiety.
Eristingcol’s reputation has likewise been besmirched by UVAI’s and defendants’
arbitrary charge that she had violated UVAI’s Construction Rules. In this regard,
individual defendants should each pay Eristingcol moral damages in the amount of
₱1,000,000.00.

6. Lastly, defendants should pay Eristingcol ₱1,000.000.00 for litigation expenses


she incurred in instituting this suit and for attorney’s fees.

At the outset, we note that the relationship between the parties is not in dispute and is, in
fact, admitted by Eristingcol in her complaint. Nonetheless, Eristingcol is adamant that the
subject matter of her complaint is properly cognizable by the regular courts and need not be
filed before a specialized body or commission.

Eristingcol’s contention is wrong.

Ostensibly, Eristingcol’s complaint, designated as one for declaration of nullity, falls within
the regular courts’ jurisdiction. However, we have, on more than one occasion, held that the
caption of the complaint is not determinative of the nature of the action.9

A scrutiny of the allegations contained in Eristingcol’s complaint reveals that the nature of the
question subject of this controversy only superficially delves into the validity of UVAI’s
Construction Rules. The complaint actually goes into the proper interpretation and
application of UVAI’s by-laws, specifically its construction rules. Essentially, the conflict
between the parties arose as Eristingcol, admittedly a member of UVAI, now wishes to be
exempt from the application of the canopy requirement set forth in UVAI’s Construction
Rules. Significantly, Eristingcol does not assail the height restriction of UVAI’s Construction
Rules, as she has readily complied therewith.

Distinctly in point is China Banking Corp. v. Court of Appeals,10 which upheld the jurisdiction
of the Securities and Exchange Commission (SEC) over the suit and recognized its special
competence to interpret and apply Valley Golf and Country Club, Inc.’s (VGCCI’s) by-laws.
We ruled, thus:

Applying the foregoing principles in the case at bar, to ascertain which tribunal has
jurisdiction we have to determine therefore whether or not petitioner is a stockholder of
VGCCI and whether or not the nature of the controversy between petitioner and private
respondent corporation is intra-corporate.

As to the first query, there is no question that the purchase of the subject share or
membership certificate at public auction by petitioner (and the issuance to it of the
corresponding Certificate of Sale) transferred ownership of the same to the latter and thus
entitled petitioner to have the said share registered in its name as a member of VGCCI. x x x.

By virtue of the aforementioned sale, petitioner became a bona fide stockholder of VGCCI
and, therefore, the conflict that arose between petitioner and VGCCI aptly exemplifies an
intra-corporate controversy between a corporation and its stockholder under Sec. 5(b) of
P.D. 902-A.

An important consideration, moreover, is the nature of the controversy between petitioner


and private respondent corporation. VGCCI claims a prior right over the subject share
anchored mainly on Sec. 3, Art. VIII of its by-laws which provides that "after a member shall
have been posted as delinquent, the Board may order his/her/its share sold to satisfy the
claims of the Club…" It is pursuant to this provision that VGCCI also sold the subject share
at public auction, of which it was the highest bidder. VGCCI caps its argument by asserting
that its corporate by-laws should prevail. The bone of contention, thus, is the proper
interpretation and application of VGCCI’s aforequoted by-laws, a subject which irrefutably
calls for the special competence of the SEC.

We reiterate herein the sound policy enunciated by the Court in Abejo v. De la Cruz:

6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative
commissions and boards the power to resolve specialized disputes in the field of labor (as in
corporations, public transportation and public utilities) ruled that Congress in requiring the
Industrial Court’s intervention in the resolution of labor-management controversies likely to
cause strikes or lockouts meant such jurisdiction to be exclusive, although it did not so
expressly state in the law. The Court held that under the "sense-making and expeditious
doctrine of primary jurisdiction … the courts cannot or will not determine a controversy
involving a question which is within the jurisdiction of an administrative tribunal, where the
question demands the exercise of sound administrative discretion requiring the special
knowledge, experience, and services of the administrative tribunal to determine technical
and intricate matters of fact, and a uniformity of ruling is essential to comply with the
purposes of the regulatory statute administered.

xxxx

In this case, the need for the SEC’s technical expertise cannot be over-emphasized involving
as it does the meticulous analysis and correct interpretation of a corporation’s by-laws as
well as the applicable provisions of the Corporation Code in order to determine the validity of
VGCCI’s claims. The SEC, therefore, took proper cognizance of the instant case.11

Likewise in point is our illuminating ruling in Sta. Clara Homeowners’ Association v. Sps.
Gaston,12 although it ultimately held that the question of subject matter jurisdiction over the
complaint of respondent- spouses Gaston for declaration of nullity of a board resolution
issued by Sta. Clara Homeowners’ Association (SCHA) was vested in the regular courts. In
Sta. Clara, the main issue raised by SCHA reads: "Whether [the CA] erred in upholding the
jurisdiction of the [RTC], ‘to declare as null and void the resolution of the Board of SCHA,
decreeing that only members [in] good standing of the said association were to be issued
stickers for use in their vehicles.’" In holding that the regular courts had jurisdiction over
respondent-spouses Gaston’s complaint for declaration of nullity, we stressed the absence of
relationship and the consequent lack of privity of contract between the parties, thus:

Are [Respondent-Spouses Gaston] SCHA Members?

In order to determine if the HIGC has jurisdiction over the dispute, it is necessary to resolve
preliminarily—on the basis of the allegations in the Complaint—whether [respondent-
spouses Gaston] are members of the SCHA.

[SCHA] contend[s] that because the Complaint arose from intra-corporate relations between
the SCHA and its members, the HIGC therefore has jurisdiction over the dispute. To support
their contention that [respondent-spouses Gaston] are members of the association, [SCHA]
cite[s] the SCHA’s Articles of Incorporation and By-laws which provide that all landowners of
the Sta. Clara Subdivision are automatically members of the SCHA.

We are not persuaded. The constitutionally guaranteed freedom of association includes the
freedom not to associate. The right to choose with whom one will associate oneself is the
very foundation and essence of that partnership. It should be noted that the provision
guarantees the right to form an association. It does not include the right to compel others to
form or join one.

More to the point, [respondent-spouses Gaston] cannot be compelled to become members


of the SCHA by the simple expedient of including them in its Articles of Incorporation and By-
laws without their express or implied consent. x x x. In the present case, however, other than
the said Articles of Incorporation and By-laws, there is no showing that [respondent-spouses
Gaston] have agreed to be SCHA members.
xxxx

No privity of Contract

Clearly then, no privity of contract exists between [SCHA] and [respondent-spouses Gaston].
As a general rule, a contract is a meeting of minds between two persons. The Civil Code
upholds the spirit over the form; thus, it deems an agreement to exist, provided the essential
requisites are present. x x x. From the moment there is a meeting of minds between the
parties, it is perfected.

As already adverted to, there are cases in which a party who enters into a contract of sale is
also bound by a lien annotated on the certificate of title. We recognized this in Bel Air Village
Association, Inc. v. Dionisio, in which we ruled:

There is no dispute that Transfer Certificate of Title No. 81136 covering the subject parcel of
land issued in the name of the petitioner contains an annotation to the effect that the lot
owner becomes an automatic member of the respondent Bel-Air Association and must abide
by such rules and regulations laid down by the Association in the interest of the sanitation,
security and the general welfare of the community. It is likewise not disputed that the
provision on automatic membership was expressly annotated on the petitioner’s Transfer
Certificate of Title and on the title of his predecessor-in-interest.

The question, therefore, boils down to whether or not the petitioner is bound by such
annotation.

Section 39 of Art. 496 (The Land Registration Act) states:

Sec. 39. Every person receiving a certificate of title in pursuance of a decree of registration,
and every subsequent purchaser of registered land who takes a certificate of title for value in
good faith shall hold the same free of all encumbrances except those noted on said
certificate x x x. (Italics supplied)

The above ruling, however, does not apply to the case at bar. When [respondent-spouses
Gaston] purchased their property in 1974 and obtained Transfer Certificates of Title Nos. T-
126542 and T-127462 for Lots 11 and 12 of Block 37 along San Jose Avenue in Sta. Clara
Subdivision, there was no annotation showing their automatic membership in the SCHA.
Thus, no privity of contract arising from the title certificate exists between [SCHA] and
[respondent-spouses Gaston].

Further, the records are bereft of any evidence that would indicate that private respondents
intended to become members of the SCHA. Prior to the implementation of the aforesaid
Resolution, they and the other homeowners who were not members of the association were
issued non-member gate pass stickers for their vehicles. This fact has not been disputed by
[SCHA]. Thus, the SCHA recognized that there were subdivision landowners who were not
members thereof, notwithstanding the provisions of its Articles of Incorporation and By-laws.

Jurisdiction Determined by Allegations in the Complaint

It is a settled rule that jurisdiction over the subject matter is determined by the allegations in
the complaint. Jurisdiction is not affected by the pleas or the theories set up by the defendant
in an answer or a motion to dismiss. Otherwise, jurisdiction would become dependent almost
entirely upon the whims of the defendant.

The Complaint does not allege that [respondent-spouses Gaston] are members of the
SCHA. In point of fact, they deny such membership. Thus, the HIGC has no jurisdiction over
the dispute.13

In stark contrast, the relationship between the parties in the instant case is well-established.
Given this admitted relationship, the privity of contract between UVAI and Eristingcol is
palpable, despite the latter’s deft phraseology of its primary cause of action as a declaration
of nullity of UVAI’s Construction Rules. In short, the crux of Eristingcol’s complaint is UVAI’s
supposed arbitrary implementation of its construction rules against Eristingcol, a member
thereof.

Moreover, as in Sta. Clara (had respondent-spouses Gaston been members of SCHA), the
controversy which arose between the parties in this case partook of the nature of an intra-
corporate dispute. Executive Order (E.O.) No. 535,14 which amended Republic Act No. 580
creating the HIGC, transferred to the HIGC the regulatory and administrative functions over
homeowners’ associations originally vested with the SEC. Section 2 of E.O. No. 535
provides in pertinent part:

2. In addition to the powers and functions vested under the Home Financing Act, the
Corporation, shall have among others, the following additional powers:

(a) x x x; and exercise all the powers, authorities and responsibilities that are vested
on the Securities and Exchange Commission with respect to home owners
association, the provision of Act 1459, as amended by P.D. 902-A, to the contrary
notwithstanding;

(b) To regulate and supervise the activities and operations of all houseowners
association registered in accordance therewith.

By virtue thereof, the HIGC likewise assumed the SEC’s original and exclusive jurisdiction to
hear and decide cases involving controversies arising from intra-corporate or partnership
relations.15 Thereafter, with the advent of Republic Act No. 8763, the foregoing powers and
responsibilities vested in the HIGC, with respect to homeowners’ associations, were
transferred to the HLURB.

As regards the defendants’ supposed embrace of the RTC’s jurisdiction by appearing thereat
and undertaking to desist from prohibiting Eristingcol’s workers from entering the village,
suffice it to state that the invocation of the doctrine in Tijam, et al. v. Sibonghanoy, et al.16 is
quite a long stretch.

The factual milieu obtaining in Tijam and in the case at bench are worlds apart. As found by
the CA, defendants’ appearance before the RTC was pursuant to, and in compliance with, a
subpoena issued by that court in connection with Eristingcol’s application for a Temporary
Restraining Order (TRO). On defendants’ supposed agreement to sign the Undertaking
allowing Eristingcol’s workers, contractors, and suppliers to enter and exit the village, this
temporary settlement cannot be equated with full acceptance of the RTC’s authority, as what
actually transpired in Tijam.1avvphi 1.zw+
The landmark case of Tijam is, in fact, only an exception to the general rule that an objection
to the court’s jurisdiction over a case may be raised at any stage of the proceedings, as the
lack of jurisdiction affects the very authority of the court to take cognizance of a case.17 In
that case, the Surety filed a Motion to Dismiss before the CA, raising the question of lack of
jurisdiction for the first time—fifteen years after the action was commenced in the Court of
First Instance (CFI) of Cebu. Indeed, in several stages of the proceedings in the CFI, as well
as in the CA, the Surety invoked the jurisdiction of said courts to obtain affirmative relief, and
even submitted its case for a final adjudication on the merits. Consequently, it was barred by
laches from invoking the CFI’s lack of jurisdiction.

To further highlight the distinction in this case, the TRO hearing was held on February 9,
1999, a day after the filing of the complaint. On even date, the parties reached a temporary
settlement reflected in the Undertaking. Fifteen days thereafter, defendants, including
Limjoco, filed a Motion to Dismiss. Certainly, this successive and continuous chain of events
cannot be characterized as laches as would bar defendants from questioning the RTC’s
jurisdiction.

In fine, based on the allegations contained in Eristingcol’s complaint, it is the HLURB, not the
RTC, which has jurisdiction over this case.

WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP. No. 64642 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 169914 March 24, 2008

ASIA'S EMERGING DRAGON CORPORATION, Petitioner,


vs.
DEPARTMENT OF TRANSPORTATION AND COMMUNICATION, SECRETARY
LEANDRO R. MENDOZA and MANILA INTERNATIONAL AIRPORT
AUTHORITY, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 174166

REPUBLIC OF THE PHILIPPINES, Represented by the DEPARTMENT OF


TRANSPORTATION AND COMMUNICATIONS and MANILA INTERNATIONAL AIRPORT
AUTHORITY, Petitioner,
vs.
COURT OF APPEALS (Eighth Division) and SALACNIB BATERINA, Respondents.

CARPIO,*

AZCUNA,*

NACHURA,*

REYES and

RESOLUTION

CORONA, J.:

For our resolution are the (1) "motion for leave of court to intervene and to admit the
attached answer-in-intervention with prayer for alternative compliance of the December 19,
2005 decision" and (2) "answer-in-intervention" of Manila Hotel Corporation (MHC) filed on
February 22, 2008. MHC seeks to intervene in the consolidated cases of G.R. Nos. 169914
and 174166 alleging that it has a legal interest in the matter in litigation. It avers that it
purchased 20% of PIATCO’s shares from the latter’s two stockholders, namely, SB Airport
Investments, Inc. and Sojitz Corporation on August 23, 2005 and August 24, 2005,
respectively. On August 26, 2005, it also entered into an agreement with Fraport AG
Frankfurt Airport Services Worldwide to purchase the latter’s 30% direct shareholdings and
31.44% indirect shareholdings1 in PIATCO.2

MHC claims that it has a legal interest in the issues raised in G.R. 169914 and the early and
complete compliance with the December 19, 2005 decision in G.R. No. 166429 of this Court.
Thus it prays that (1) AEDC’s petition be dismissed; (2) its (MHC’s) proposed alternative
manner of implementing the December 19, 2005 decision be approved3 and (3) it be allowed
to manage and operate the NAIA IPT III for 25 years.4

MHC’s motion for intervention is an improper remedy.

Intervention is a remedy by which a third party, not originally impleaded in the proceedings,
becomes a litigant therein to enable him, her or it to protect or preserve a right or interest
which may be affected by such proceedings. The pertinent rule is Rule 19, Section 1 of the
Rules of Court which states:

SEC. 1. Who may intervene. — A person who has a legal interest in the matter in litigation,
or in the success of either of the parties, or an interest against both, or is so situated as to be
adversely affected by a distribution or other disposition of property in the custody of the court
or of an officer thereof may, with leave of court, be allowed to intervene in the action. The
court shall consider whether or not the intervention will unduly delay or prejudice the
adjudication of the rights of the original parties, and whether or not the intervenor's rights
may be fully protected in a separate proceeding. 1avv phi 1

In outline form, the following are the requisites for intervention of a non-party:

1. Legal interest

(a) in the matter in controversy; or

(b) in the success of either of the parties; or

(c) against both parties; or

(d) person is so situated as to be adversely affected by a distribution or other


disposition of property in the custody of the court or of an officer thereof;

2. Intervention will not unduly delay or prejudice the adjudication of rights of original
parties;

3. Intervenor's rights may not be fully protected in a separate proceeding.5

MHC asserts that because of its substantial stockholdings in PIATCO, it has a legal interest
in the matter in litigation. However, it conveniently fails to state its legal basis for the
intervention.

The interest contemplated by law must be actual, substantial, material, direct and immediate,
and not simply contingent or expectant. It must be of such direct and immediate character
that the intervenor will either gain or lose by the direct legal operation and effect of the
judgment.6

The scenario here is similar to the intervention sought in Magsaysay-Labrador v. CA.7 In that
case, Rodriguez-Magsaysay filed an action against Subic Land Corporation (SLC) et al. She
alleged that her husband, the late Senator Genaro Magsaysay, assigned land (which was
part of their conjugal property) to SLC. She prayed that this assignment be annulled.
Magsaysay-Labrador et al., the sisters of the late senator, filed a motion for intervention on
the ground that their brother had already conveyed to them his shareholdings in SLC
amounting to 41% of its total capital. They argued that as transferees of the shares, they had
a legal interest in the matter in litigation. The Court disagreed:

Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote,


conjectural, consequential and collateral. At the very least, their interest is purely inchoate, or
in sheer expectancy of a right in the management of the corporation and to share in the
profits thereof and in the properties and assets thereof on dissolution, after payment of the
corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of the
corporation, it does not vest the owner thereof with any legal right or title to any of the
property, his interest in the corporate property being equitable or beneficial in nature.
Shareholders are in no legal sense the owners of corporate property, which is owned by the
corporation as a distinct legal person.8

In this case, the matter in controversy is the NAIA IPT III. MHC has no connection at all to
this structure. It is merely a stockholder of PIATCO, the builder of NAIA IPT III. Its interest, if
any, is indirect, contingent and inchoate. PIATCO has a legal personality separate and
distinct from that of its stockholders, including MHC. It has rights and obligations which
pertain solely to itself, not to any of its component members (i.e., its stockholders).9 The
members may change but the juridical person (in this case, PIATCO) remains the same
without alteration.10 Its property is not merged with those owned by its stockholders.11 No
stockholder can identify itself with the corporation.12 Nor can any stockholder claim to
possess a right which properly and exclusively belongs to the corporation. Thus, it is
PIATCO alone which is entitled to receive payment of just compensation.

Moreover, MHC has no right to the reliefs it prays for. It wants to complete NAIA IPT III and
manage it for 25 years. But on what ground? As stockholder of PIATCO, the bidder whose
contracts were nullified? How can MHC derive its claim to operate NAIA IPT III from PIATCO
when PIATCO itself has no legal right to operate the facility? Clearly, MHC’s claim is not only
baseless but also absurd.

If parties with such a conjectural, collateral, consequential, expectant and remote interest
were allowed to intervene, proceedings would become unnecessarily complicated, expensive
and interminable.13 It will only unduly delay and prolong the adjudication of the rights of the
original parties.

Finally, granting but not conceding that MHC has a cause of action cognizable by the courts,
its interest as a stockholder of PIATCO can well be protected in a separate proceeding.

It is settled that the right to intervene is not an absolute right; it may only be permitted by the
courts when the movant establishes facts which satisfy the requirements of the law
authorizing it.14

As the requisites have not been met, MHC has no right whatsoever to intervene.

WHEREFORE, the motion for leave to intervene of Manila Hotel Corporation is


hereby DENIED for being an improper remedy.

SO ORDERED.
G.R. No. 170122 October 12, 2009

CLARITA DEPAKAKIBO GARCIA, Petitioner,


vs.
SANDIGANBAYAN and REPUBLIC OF THE PHILIPPINES, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 171381

CLARITA DEPAKAKIBO GARCIA, Petitioner,


vs.
SANDIGANBAYAN and REPUBLIC OF THE PHILIPPINES, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Before us are these two (2) consolidated petitions under Rule 65, each interposed by
petitioner Clarita D. Garcia, with application for injunctive relief. In the first petition for
mandamus and/or certiorari, docketed as G.R. No. 170122, petitioner seeks to nullify and set
aside the August 5, 2005 Order,1 as reiterated in another Order dated August 26, 2005, both
issued by the Sandiganbayan, Fourth Division, which effectively denied the petitioner’s
motion to dismiss and/or to quash Civil Case No. 0193, a suit for forfeiture commenced by
the Republic of the Philippines against the petitioner and her immediate family. The second
petition for certiorari, docketed as G.R. No. 171381, seeks to nullify and set aside the
November 9, 2005 Resolution2 of the Sandiganbayan, Fourth Division, insofar as it likewise
denied the petitioner’s motion to dismiss and/or quash Civil Case No. 0196, another
forfeiture case involving the same parties but for different properties.

The Facts

To recover unlawfully acquired funds and properties in the aggregate amount of PhP
143,052,015.29 that retired Maj. Gen. Carlos F. Garcia, his wife, herein petitioner Clarita,
children Ian Carl, Juan Paulo and Timothy Mark (collectively, the Garcias) had allegedly
amassed and acquired, the Republic, through the Office of the Ombudsman (OMB),
pursuant to Republic Act No. (RA) 1379,3 filed with the Sandiganbayan (SB) on October 29,
2004 a petition for the forfeiture of those properties. This petition, docketed as Civil Case
No. 0193, was eventually raffled to the Fourth Division of the anti-graft court.

Civil Case No. 0193 was followed by the filing on July 5, 2005 of another forfeiture case,
docketed as Civil Case No. 0196, this time to recover funds and properties amounting to PhP
202,005,980.55. Civil Case No. 0196 would eventually be raffled also to the Fourth Division
of the SB. For convenience and clarity, Civil Case No. 0193 shall hereinafter be also referred
to as Forfeiture I and Civil Case No. 0196 as Forfeiture II.

Prior to the filing of Forfeiture II, but subsequent to the filing of Forfeiture I, the OMB charged
the Garcias and three others with violation of RA 7080 (plunder) under an Information dated
April 5, 2005 which placed the value of the property and funds plundered at PhP
303,272,005.99. Docketed as Crim. Case No. 28107, the Information was raffled off to the
Second Division of the SB. The plunder charge, as the parties’ pleadings seem to indicate,
covered substantially the same properties identified in both forfeiture cases.

After the filing of Forfeiture I, the following events transpired in relation to the case:

(1) The corresponding summons were issued and all served on Gen. Garcia at
his place of detention. Per the Sheriff’s Return4 dated November 2, 2005, the
summons were duly served on respondent Garcias. Earlier, or on October 29, 2004,
the SB issued a writ of attachment in favor of the Republic, an issuance which Gen.
Garcia challenged before this Court, docketed as G.R. No. 165835.

Instead of an answer, the Garcias filed a motion to dismiss on the ground of the SB’s
lack of jurisdiction over separate civil actions for forfeiture. The OMB countered with
a motion to expunge and to declare the Garcias in default. To the OMB’s motion, the
Garcias interposed an opposition in which they manifested that they have meanwhile
repaired to the Court on certiorari, docketed as G.R. No. 165835 to nullify the writ of
attachment SB issued in which case the SB should defer action on the forfeiture case
as a matter of judicial courtesy.

(2) By Resolution5 of January 20, 2005, the SB denied the motion to dismiss;
declared the same motion as pro forma and hence without tolling effect on the period
to answer. The same resolution declared the Garcias in default.

Another resolution6 denied the Garcias’ motion for reconsideration and/or to admit
answer, and set a date for the ex-parte presentation of the Republic’s evidence.

A second motion for reconsideration was also denied on February 23, 2005,
pursuant to the prohibited pleading rule.

(3) Despite the standing default order, the Garcias moved for the transfer and
consolidation of Forfeiture I with the plunder case which were respectively pending in
different divisions of the SB, contending that such consolidation is mandatory under
RA 8249.7

On May 20, 2005, the SB 4th Division denied the motion for the reason that the
forfeiture case is not the corresponding civil action for the recovery of civil liability
arising from the criminal case of plunder.

(4) On July 26, 2005, the Garcias filed another motion to dismiss and/or to quash
Forfeiture I on, inter alia, the following grounds: (a) the filing of the plunder case
ousted the SB 4th Division of jurisdiction over the forfeiture case; and (b) that the
consolidation is imperative in order to avoid possible double jeopardy
entanglements.

By Order8 of August 5, 2005, the SB merely noted the motion in view of movants having
been declared in default which has yet to be lifted.

It is upon the foregoing factual antecedents that petitioner Clarita has interposed her first
special civil action for mandamus and/or certiorari docketed as G.R. No. 170122, raising the
following issues:
I. Whether or not the [SB] 4th Division acted without or in excess of jurisdiction or with grave
abuse of discretion x x x in issuing its challenged order of August 5, 2005 and August 26
2005 that merely "Noted without action," hence refused to resolve petitioner’s motion to
dismiss and/or to quash by virtue of petitioner’s prior default in that:

A. For lack of proper and valid service of summons, the [SB] 4th Division could
not have acquired jurisdiction over petitioner’s, [and her children’s] x x x persons,
much less make them become the true "parties-litigants, contestants or legal
adversaries" in forfeiture I. As the [SB] has not validly acquired jurisdiction over the
petitioner’s [and her children’s] x x x persons, they could not possibly be declared in
default, nor can a valid judgment by default be rendered against them.

B. Even then, mere declaration in default does not per se bar petitioner from
challenging the [SB] 4th Division’s lack of jurisdiction over the subject matter of
forfeiture I as the same can be raised anytime, even after final judgment. In the
absence of jurisdiction over the subject matter, any and all proceedings before the
[SB] are null and void.

C. Contrary to its August 26, 2005 rejection of petitioner’s motion for reconsideration
of the first challenged order that the issue of jurisdiction raised therein had already
been passed upon by [the SB 4th Division’s] resolution of May 20, 2005, the records
clearly show that the grounds relied upon by petitioner in her motion to dismiss
and/or to quash dated July 26, 2005 were entirely different, separate and distinct
from the grounds set forth in petitioner’s manifestation and motion [to consolidate]
dated April 15, 2005 that was denied by it per its resolution of May 20, 2005.

D. In any event, the [SB] 4th Division has been ousted of jurisdiction over the subject
matter of forfeiture I upon the filing of the main plunder case against petitioner that
mandates the automatic forfeiture of the subject properties in forfeiture cases I & II as
a function or adjunct of any conviction for plunder.

E. Being incompatible, the forfeiture law (RA No. 1379 [1955]) was impliedly
repealed by the plunder law (RA No. 7080 [1991]) with automatic forfeiture
mechanism.

F. Since the sought forfeiture includes properties purportedly located in the USA, any
penal conviction for forfeiture in this case cannot be enforced outside of the
Philippines x x x.

G. Based on orderly procedure and sound administration of justice, it is imperative


that the matter of forfeiture be exclusively tried in the main plunder case to avoid
possible double jeopardy entanglements, and to avoid possible conflicting decisions
by 2 divisions of the [SB] on the matter of forfeiture as a penal sanction.9(Emphasis
added.)

With respect to Forfeiture II, the following events and proceedings occurred or were taken
after the petition for Forfeiture II was filed:

(1) On July 12, 2005, the SB sheriff served the corresponding summons. In his return
of July 13, 2005, the sheriff stated giving the copies of the summons to the
OIC/Custodian of the PNP Detention Center who in turn handed them to Gen.
Garcia. The general signed his receipt of the summons, but as to those pertaining to
the other respondents, Gen. Garcia acknowledged receiving the same, but with the
following qualifying note: "I’m receiving the copies of Clarita, Ian Carl, Juan Paolo &
Timothy – but these copies will not guarantee it being served to the above-
named (sic)."

(2) On July 26, 2005, Clarita and her children, thru special appearance of counsel,
filed a motion to dismiss and/or to quash Forfeiture II primarily for lack of jurisdiction
over their persons and on the subject matter thereof which is now covered by the
plunder case.

To the above motion, the Republic filed its opposition with a motion for
alternative service of summons. The motion for alternative service would be
repeated in another motion of August 25, 2005.

(3) By Joint Resolution of November 9, 2005, the SB denied both the petitioner’s
motion to dismiss and/or to quash and the Republic’s motion for alternative service of
summons.

On January 24, 2006, the SB denied petitioner’s motion for partial reconsideration.10

From the last two issuances adverted to, Clarita has come to this Court via the instant
petition for certiorari, docketed as GR No. 171381. As there submitted, the SB 4th Division
acted without or in excess of jurisdiction or with grave abuse of discretion in issuing its Joint
Resolution dated November 9, 2005 and its Resolution of January 24, 2006 denying
petitioner’s motion to dismiss and/or to quash in that:

A. Based on its own finding that summons was improperly served on petitioner,
the [SB] ought to have dismissed forfeiture II for lack of jurisdiction over petitioner’s
person x x x.

B. By virtue of the plunder case filed with the [SB] Second Division that mandates the
automatic forfeiture of unlawfully acquired properties upon conviction, the [SB] Fourth
Division has no jurisdiction over the subject matter of forfeiture.

C. Being incompatible, the forfeiture law (RA No. 1379 [1955]) was impliedly
repealed by the plunder law (RA No. 7080 [1991]) with automatic forfeiture
mechanism.

D. Based on orderly procedure and sound administration of justice, it is imperative


that the matter of forfeiture be exclusively tried in the main plunder case to avoid
possible double jeopardy entanglements and worse conflicting decisions by 2
divisions of the Sandiganbayan on the matter of forfeiture as a penal
sanction.11(Emphasis added.)

Per Resolution of the Court dated March 13, 2006, G.R. No. 170122 and G.R. No.
171381 were consolidated.

The Court’s Ruling

The petitions are partly meritorious.


The core issue tendered in these consolidated cases ultimately boils down to the question of
jurisdiction and may thusly be couched into whether the Fourth Division of the SB has
acquired jurisdiction over the person of petitioner—and her three sons for that matter—
considering that, first, vis-à-vis Civil Case Nos. 0193 (Forfeiture I) and 0196 (Forfeiture II),
summons against her have been ineffectively or improperly served and, second, that the
plunder case—Crim. Case No. 28107—has already been filed and pending with another
division of the SB, i.e., Second Division of the SB.

Plunder Case in Crim. Case No. 28107 Did Not Absorb the Forfeiture Cases in Civil
Case Nos. 0193 and 0196

Petitioner maintains that the SB 4th Division has no jurisdiction over the subject matter of
Forfeitures I and II as both cases are now covered or included in the plunder case against
the Garcias. Or as petitioner puts it a bit differently, the filing of the main plunder case (Crim.
Case No. 28107), with its automatic forfeiture mechanism in the event of conviction, ousted
the SB 4th Division of its jurisdiction over the subject matter of the forfeiture cases. The
inclusion of the forfeiture cases with the plunder case is necessary, so petitioner claims, to
obviate possible double jeopardy entanglements and colliding case dispositions. Prescinding
from these premises, petitioner would ascribe grave abuse of discretion on the SB 4th
Division for not granting its separate motions to dismiss the two forfeiture petitions and/or to
consolidate them with the plunder case on the foregoing ground.

Petitioner’s contention is untenable. And in response to what she suggests in some of her
pleadings, let it be stated at the outset that the SB has jurisdiction over actions for forfeiture
under RA 1379, albeit the proceeding thereunder is civil in nature. We said so in Garcia v.
Sandiganbayan12 involving no less than petitioner’s husband questioning certain orders
issued in Forfeiture I case.

Petitioner’s posture respecting Forfeitures I and II being absorbed by the plunder case, thus
depriving the 4th Division of the SB of jurisdiction over the civil cases, is flawed by the
assumptions holding it together, the first assumption being that the forfeiture cases are the
corresponding civil action for recovery of civil liability ex delicto. As correctly ruled by the SB
4th Division in its May 20, 2005 Resolution,13 the civil liability for forfeiture cases does not
arise from the commission of a criminal offense, thus:

Such liability is based on a statute that safeguards the right of the State to recover unlawfully
acquired properties. The action of forfeiture arises when a "public officer or employee
[acquires] during his incumbency an amount of property which is manifestly out of proportion
of his salary x x x and to his other lawful income x x x."14 Such amount of property is then
presumed prima facie to have been unlawfully acquired.15 Thus "if the respondent [public
official] is unable to show to the satisfaction of the court that he has lawfully acquired the
property in question, then the court shall declare such property forfeited in favor of the State,
and by virtue of such judgment the property aforesaid shall become property of the State.16 x
x x (Citations in the original.)

Lest it be overlooked, Executive Order No. (EO) 14, Series of 1986, albeit defining only the
jurisdiction over cases involving ill-gotten wealth of former President Marcos, his immediate
family and business associates, authorizes under its Sec. 317 the filing of forfeiture suits
under RA 1379 which will proceed independently of any criminal proceedings. The Court,
in Republic v. Sandiganbayan,18 interpreted this provision as empowering the Presidential
Commission on Good Government to file independent civil actions separate from the criminal
actions.
Forfeiture Cases and the Plunder Case Have Separate Causes of Action; the Former Is
Civil in Nature while the Latter Is Criminal

It bears stressing, as a second point, that a forfeiture case under RA 1379 arises out of a
cause of action separate and different from a plunder case, thus negating the notion that the
crime of plunder charged in Crim. Case No. 28107 absorbs the forfeiture cases. In a
prosecution for plunder, what is sought to be established is the commission of the criminal
acts in furtherance of the acquisition of ill-gotten wealth. In the language of Sec. 4 of RA
7080, for purposes of establishing the crime of plunder, it is "sufficient to establish beyond
reasonable doubt a pattern of overt or criminal acts indicative of the overall unlawful scheme
or conspiracy [to amass, accumulate or acquire ill-gotten wealth]." On the other hand, all that
the court needs to determine, by preponderance of evidence, under RA 1379 is the
disproportion of respondent’s properties to his legitimate income, it being unnecessary to
prove how he acquired said properties. As correctly formulated by the Solicitor General, the
forfeitable nature of the properties under the provisions of RA 1379 does not proceed from a
determination of a specific overt act committed by the respondent public officer leading to the
acquisition of the illegal wealth.19

Given the foregoing considerations, petitioner’s thesis on possible double jeopardy


entanglements should a judgment of conviction ensue in Crim. Case 28107 collapses
entirely. Double jeopardy, as a criminal law concept, refers to jeopardy of punishment for the
same offense,20 suggesting that double jeopardy presupposes two separate criminal
prosecutions. Proceedings under RA 1379 are, to repeat, civil in nature. As a necessary
corollary, one who is sued under RA 1379 may be proceeded against for a criminal offense.
Thus, the filing of a case under that law is not barred by the conviction or acquittal of the
defendant in Crim. Case 28107 for plunder.

Moreover, given the variance in the nature and subject matter of the proceedings between
the plunder case and the subject forfeiture cases, petitioner’s apprehension about the
likelihood of conflicting decisions of two different divisions of the anti-graft court on the matter
of forfeiture as a penal sanction is specious at best. What the SB said in this regard merits
approving citation:

On the matter of forfeiture as a penal sanction, respondents argue that the division where the
plunder case is pending may issue a decision that would collide or be in conflict with the
decision by this division on the forfeiture case. They refer to a situation where this Court’s
Second Division may exonerate the respondents in the plunder case while the Fourth
Division grant the petition for forfeiture for the same properties in favor of the state or vice
versa.

Suffice it to say that the variance in the decisions of both divisions does not give rise to a
conflict. After all, forfeiture in the plunder case requires the attendance of facts and
circumstances separate and distinct from that in the forfeiture case. Between the two (2)
cases, there is no causal connection in the facts sought to be established and the issues
sought to be addressed. As a result, the decision of this Court in one does not have a
bearing on the other.

There is also no conflict even if the decisions in both cases result in an order for the forfeiture
of the subject properties. The forfeiture following a conviction in the plunder case will apply
only to those ill-gotten wealth not recovered by the forfeiture case and vise (sic) versa. This
is on the assumption that the information on plunder and the petition for forfeiture cover the
same set of properties.21
RA 7080 Did Not Repeal RA 1379

Petitioner takes a different tack in her bid to prove that SB erred in not dismissing Forfeitures
I and II with her assertion that RA 7080 impliedly repealed RA 1379. We are not convinced.

Nowhere in RA 7080 can we find any provision that would indicate a repeal, expressly or
impliedly, of RA 1379. RA 7080 is a penal statute which, at its most basic, aims to penalize
the act of any public officer who by himself or in connivance with members of his family
amasses, accumulates or acquires ill-gotten wealth in the aggregate amount of at least PhP
50 million. On the other hand, RA 1379 is not penal in nature, in that it does not make a
crime the act of a public official acquiring during his incumbency an amount of property
manifestly out of proportion of his salary and other legitimate income. RA 1379 aims to
enforce the right of the State to recover the properties which were not lawfully acquired by
the officer.

It has often been said that all doubts must be resolved against any implied repeal and all
efforts should be exerted to harmonize and give effect to all laws and provisions on the same
subject. To be sure, both RA 1379 and RA 7080 can very well be harmonized. The Court
perceives no irreconcilable conflict between them. One can be enforced without nullifying the
other.

Sandiganbayan Did Not Acquire Jurisdiction over the Persons of Petitioner and Her
Children

On the issue of lack of jurisdiction, petitioner argues that the SB did not acquire jurisdiction
over her person and that of her children due to a defective substituted service of summons.
There is merit in petitioner’s contention.1 a vv p h i 1

Sec. 7, Rule 14 of the 1997 Revised Rules of Civil Procedure clearly provides for the
requirements of a valid substituted service of summons, thus:

SEC. 7. Substituted service.—If the defendant cannot be served within a reasonable time as
provided in the preceding section [personal service on defendant], service may be effected
(a) by leaving copies of the summons at the defendant’s residence with some person of
suitable age and discretion then residing therein, or (b) by leaving the copies at defendant’s
office or regular place of business with some competent person in charge thereof.

It is basic that a court must acquire jurisdiction over a party for the latter to be bound by its
decision or orders. Valid service of summons, by whatever mode authorized by and proper
under the Rules, is the means by which a court acquires jurisdiction over a person.22

In the instant case, it is undisputed that summons for Forfeitures I and II were served
personally on Maj. Gen. Carlos Flores Garcia, who is detained at the PNP Detention Center,
who acknowledged receipt thereof by affixing his signature. It is also undisputed that
substituted service of summons for both Forfeitures I and II were made on petitioner and her
children through Maj. Gen. Garcia at the PNP Detention Center. However, such substituted
services of summons were invalid for being irregular and defective.

In Manotoc v. Court of Appeals,23 we broke down the requirements to be:


(1) Impossibility of prompt personal service, i.e., the party relying on substituted
service or the sheriff must show that defendant cannot be served promptly or there is
impossibility of prompt service within a reasonable time. Reasonable time being "so
much time as is necessary under the circumstances for a reasonably prudent and
diligent man to do, conveniently, what the contract or duty requires that should be
done, having a regard for the rights and possibility of loss, if any[,] to the other
party."24 Moreover, we indicated therein that the sheriff must show several attempts
for personal service of at least three (3) times on at least two (2) different dates.

(2) Specific details in the return, i.e., the sheriff must describe in the Return of
Summons the facts and circumstances surrounding the attempted personal service.

(3) Substituted service effected on a person of suitable age and discretion residing at
defendant’s house or residence; or on a competent person in charge of defendant’s
office or regular place of business.

From the foregoing requisites, it is apparent that no valid substituted service of summons
was made on petitioner and her children, as the service made through Maj. Gen. Garcia did
not comply with the first two (2) requirements mentioned above for a valid substituted service
of summons. Moreover, the third requirement was also not strictly complied with as the
substituted service was made not at petitioner’s house or residence but in the PNP Detention
Center where Maj. Gen. Garcia is detained, even if the latter is of suitable age and
discretion. Hence, no valid substituted service of summons was made.

The stringent rules on valid service of summons for the court to acquire jurisdiction over the
person of the defendants, however, admits of exceptions, as when the party voluntarily
submits himself to the jurisdiction of the court by asking affirmative relief.25 In the instant
case, the Republic asserts that petitioner is estopped from questioning improper service of
summons since the improvident service of summons in both forfeiture cases had been cured
by their (petitioner and her children) voluntary appearance in the forfeiture cases. The
Republic points to the various pleadings filed by petitioner and her children during the subject
forfeiture hearings. We cannot subscribe to the Republic’s views.

Special Appearance to Question a Court’s Jurisdiction Is Not Voluntary Appearance

The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil Procedure clearly
provides:

Sec. 20. Voluntary appearance.—The defendant’s voluntary appearance in the action shall
be equivalent to service of summons. The inclusion in a motion to dismiss of other
grounds aside from lack of jurisdiction over the person of the defendant shall not be
deemed a voluntary appearance. (Emphasis ours.)

Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of the court over
his person, together with other grounds raised therein, is not deemed to have appeared
voluntarily before the court. What the rule on voluntary appearance—the first sentence of the
above-quoted rule—means is that the voluntary appearance of the defendant in court is
without qualification, in which case he is deemed to have waived his defense of lack of
jurisdiction over his person due to improper service of summons.

The pleadings filed by petitioner in the subject forfeiture cases, however, do not show that
she voluntarily appeared without qualification. Petitioner filed the following pleadings in
Forfeiture I: (a) motion to dismiss; (b) motion for reconsideration and/or to admit answer; (c)
second motion for reconsideration; (d) motion to consolidate forfeiture case with plunder
case; and (e) motion to dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a) motion to
dismiss and/or to quash Forfeiture II; and (b) motion for partial reconsideration.

The foregoing pleadings, particularly the motions to dismiss, were filed by petitioner solely
for special appearance with the purpose of challenging the jurisdiction of the SB over
her person and that of her three children. Petitioner asserts therein that SB did not
acquire jurisdiction over her person and of her three children for lack of valid service of
summons through improvident substituted service of summons in both Forfeiture I and
Forfeiture II. This stance the petitioner never abandoned when she filed her motions for
reconsideration, even with a prayer to admit their attached Answer Ex Abundante Ad
Cautelam dated January 22, 2005 setting forth affirmative defenses with a claim for
damages. And the other subsequent pleadings, likewise, did not abandon her stance and
defense of lack of jurisdiction due to improper substituted services of summons in the
forfeiture cases. Evidently, from the foregoing Sec. 20, Rule 14 of the 1997 Revised Rules
on Civil Procedure, petitioner and her sons did not voluntarily appear before the SB
constitutive of or equivalent to service of summons.

Moreover, the leading La Naval Drug Corp. v. Court of Appeals26 applies to the instant case.
Said case elucidates the current view in our jurisdiction that a special appearance before the
court––challenging its jurisdiction over the person through a motion to dismiss even if the
movant invokes other grounds––is not tantamount to estoppel or a waiver by the movant of
his objection to jurisdiction over his person; and such is not constitutive of a voluntary
submission to the jurisdiction of the court.

Thus, it cannot be said that petitioner and her three children voluntarily appeared before the
SB to cure the defective substituted services of summons. They are, therefore, not estopped
from questioning the jurisdiction of the SB over their persons nor are they deemed to have
waived such defense of lack of jurisdiction. Consequently, there being no valid substituted
services of summons made, the SB did not acquire jurisdiction over the persons of petitioner
and her children. And perforce, the proceedings in the subject forfeiture cases, insofar as
petitioner and her three children are concerned, are null and void for lack of jurisdiction.
Thus, the order declaring them in default must be set aside and voided insofar as petitioner
and her three children are concerned. For the forfeiture case to proceed against them, it is,
thus, imperative for the SB to serve anew summons or alias summons on the petitioner and
her three children in order to acquire jurisdiction over their persons.

WHEREFORE, the petitions for certiorari and mandamus are PARTIALLY GRANTED. The
Sandiganbayan, Fourth Division has not acquired jurisdiction over petitioner Clarita D. Garcia
and her three children. The proceedings in Civil Case Nos. 0193 and 0196 before the
Sandiganbayan, Fourth Division, insofar as they pertain to petitioner and her three children,
are VOID for lack of jurisdiction over their persons. No costs.

SO ORDERED.
[G.R. No. 133365. September 16, 2003.]

PLATINUM TOURS AND TRAVEL, INCORPORATED, Petitioner, v. JOSE M. PANLILIO,


Respondent.

DECISION

CORONA, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the January 15, 1998 decision 1 of the Court of Appeals which ruled that:chanrob1es virtual
1aw library

x x x

Consequently, the respondent judge committed grave abuse of discretion in allowing the
consolidation of Civil Case No. 96-635 with Civil Case No. 94-1634.chanrob1es virtua1 1aw
1ibrary

. . . We also leave it to the respondent Judge to decide whether he will return Civil Case No.
96-635 to Branch 146 or keep it in his docket but should he opt for the latter, he should act
on it as a separate case from Civil Case No. 94-1634.

WHEREFORE; the petition is partially granted and the assailed Orders dated July 23, 1996
and September 17, 1996, allowing the consolidation of Civil Case No. 96-635 with Civil Case
No. 94-1634 and denying petitioner’s motion for reconsideration, respectively, are
ANNULLED and SET ASIDE, with the consequent complete severance of the two (2) cases.
2

The facts follow:chanrob1es virtual 1aw library

On April 27, 1994, petitioner Platinum Tours and Travel Inc. (Platinum) filed a complaint for a
sum of money with damages against Pan Asiatic Travel Corporation (PATC) and its
president Nelida G. Galvez. Platinum sought to collect payment for the airline tickets which
PATC bought from it. The case was docketed as Civil Case No. 94-1634.

On October 24, 1994, the Regional Trial Court of Makati City, Branch 62, rendered a
judgment 3 by default in favor of Platinum and ordered PATC and Nelida G. Galvez to
solidarily pay Platinum actual damages of P359,621.03 with legal interest, P50,000
attorney’s fees and cost of suit.

On February 10, 1995, a writ of execution was issued on motion of Platinum. Pursuant to the
writ, Manila Polo Club Proprietary Membership Certificate No. 2133 in the name of Nelida G.
Galvez was levied upon and sold for P479,888.48 to a certain Ma. Rosario Khoo.

On June 2, 1995, private respondent Jose M. Panlilio filed a motion to intervene in Civil Case
No. 94-1634. Panlilio claimed that, in October 1992, Galvez had executed in his favor a
chattel mortgage over her shares of stock in the Manila Polo Club to secure her P1 million
loan and that Galvez had already delivered to him the stock certificates valued at P5 million.
On June 9, 1995, the trial court denied Panlilio’s motion for intervention:chanrob1es virtual
1aw library

Submitted for resolution is Jose M. Panlilio’s Motion for Intervention dated May 31, 1995.

This Court has to deny the motion because (1) a decision had already been rendered in this
case and that the only matters at issue is the propriety of the execution; (2) it will only delay
or prejudice the adjudication of the rights of the original parties; and, (3) the Intervenor’s
rights may be fully protected in a separate action. 4

On January 29, 1996, the trial court declared the execution sale null and void due to
irregularities in the conduct thereof.

On May 3, 1996, Panlilio filed against Galvez a collection case with application for a writ of
preliminary attachment of the disputed Manila Polo Club shares, docketed as Civil Case No.
96-365. The case was raffled to Branch 146 of the Regional Trial Court of Makati City. 5 In
the meantime, Panlilio again attempted to intervene in Civil Case No. 94-1634, this time by
incorporating in his complaint a motion to consolidate Civil Case No. 96-365 and Civil Case
No. 94-1634.

On June 13, 1996, Judge Salvador Tensuan of Branch 146 granted the motion for
consolidation on condition that Judge Roberto Diokno of Branch 62, who was trying Civil
Case No. 94-1634, would not object thereto. Judge Diokno later issued an order, dated July
23, 1996, allowing the consolidation of the two cases and setting for hearing Panlilio’s
application for a writ of preliminary attachment.

Platinum, as plaintiff in Civil Case No. 94-1634, moved to reconsider the July 23, 1996 order
of Judge Diokno but its motion was denied.

On January 31, 1997, Platinum filed a petition for certiorari at the Court of Appeals assailing,
among others, the July 23, 1996 order of Judge Diokno allowing the consolidation of Civil
Case No. 96-365 and Civil Case No. 94-1634.

In a decision dated January 15, 1998, the Court of Appeals annulled the assailed order but
left it to Judge Diokno to decide whether to return Civil Case No. 96-365 to Judge Tensuan in
Branch 146, or to keep it in his docket and decide it as a separate case.chanrob1es virtua1
1aw 1ibrary

Platinum filed a motion for partial reconsideration of the decision of the Court of Appeals,
praying that Civil Case No. 96-365 be returned to Branch 146 or re-raffled to another RTC
Branch of Makati. However, the motion was denied by the Court of Appeals on April 2, 1998.

In the instant petition, Platinum insists that the Makati RTC, Branch 62, has no jurisdiction to
try Civil Case No. 96-365. It argues that, when Judge Diokno’s July 23, 1996 order allowing
the consolidation of the two cases was annulled and set aside, RTC Branch 62’s basis for
acquiring jurisdiction over Civil Case No. 96-365 was likewise extinguished.

We disagreee.

Jurisdiction is the power and authority of the court to hear, try and decide a case. 6 In
general, jurisdiction may either be over the nature of the action, over the subject matter, over
the person of the defendants or over the issues framed in the pleadings.
Jurisdiction over the nature of the action and subject matter is conferred by law. It is
determined by the allegations of the complaint, irrespective of whether or not the plaintiff is
entitled to recover upon all or some of the claims asserted therein. 7 Jurisdiction over the
person of the plaintiff is acquired from the time he files his complaint; while jurisdiction over
the person of the defendant is acquired by his voluntary appearance in court and his
submission to its authority, or by the coercive power of legal processes exerted over his
person.

Since jurisdiction is the power to hear and determine a particular case, it does not depend
upon the regularity of the exercise by the court of that power or on the correctness of its
decisions.

In the case at bar, there is no doubt that Panlilio’s collection case docketed as Civil Case No.
96-365 falls within the jurisdiction of the RTC of Makati, Branch 62. The fact that the Court of
Appeals subsequently annulled Judge Diokno’s order granting the consolidation of Civil Case
No. 96-365 and Civil Case No. 94-1634, did not affect the jurisdiction of the court which
issued the said order.

"Jurisdiction" should be distinguished from the "exercise of jurisdiction." Jurisdiction refers to


the authority to decide a case, not the orders or the decision rendered therein. Accordingly,
where a court has jurisdiction over the person and the subject matter, as in the instant case,
the decision on all questions arising from the case is but an exercise of such jurisdiction. Any
error that the court may commit in the exercise of its jurisdiction is merely an error of
judgment which does not affect its authority to decide the case, much less divest the court of
the jurisdiction over the case.

We find no reversible error on the part of the Court of Appeals when it left to Judge Diokno of
Branch 62 the discretion on whether to return Civil Case No. 96-365 to Branch 146 or to
decide the same as a separate case in his own sala.

Moreover, we find the instant petition premature and speculative. Had Platinum waited until
Judge Diokno decided on what to do with Civil Case No. 96-365, the parties would have
been spared the trouble and the expense of seeking recourse from this Court, which in turn
would have had one petition less in its docket.chanrob1es virtua1 1aw 1ibrary

The unfounded fear that Civil Case No. 96-365 would unduly delay the final resolution of Civil
Case No. 94-1634, if the former were retained by Branch 62, made Platinum act with haste.
In so doing, it wasted the precious time not only of the parties but also of this Court.

All told, nothing legally prevents the RTC of Makati, Branch 62, from proceeding with Civil
Case No. 96-365. Should it decide to retain the case, it is hereby directed to resolve the
same with dispatch.

WHEREFORE, petition is hereby DENIED.

SO ORDERED.
G.R. No. 155206 October 28, 2003

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,


vs.
EDUARDO M. SANTIAGO, substituted by his widow ROSARIO ENRIQUEZ VDA. DE
SANTIAGO, respondent.

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by the Government Service
Insurance System (GSIS), seeking to reverse and set aside the Decision1 dated February 22,
2002 of the Court of Appeals (CA) in CA-G.R. CV No. 62309 and its Resolution dated
September 5, 2002 denying its motion for reconsideration.

The antecedent facts of the case, as culled from the assailed CA decision and that of the trial
court, are as follows:

Deceased spouses Jose C. Zulueta and Soledad Ramos obtained various loans from
defendant GSIS for (the) period September, 1956 to October, 1957 in the total amount of
₱3,117,000.00 secured by real estate mortgages over parcels of land covered by TCT Nos.
26105, 37177 and 50365. The Zuluetas failed to pay their loans to defendant GSIS and the
latter foreclosed the real estate mortgages dated September 25, 1956, March 6, 1957, April
4, 1957 and October 15, 1957.

On August 14, 1974, the mortgaged properties were sold at public auction by defendant
GSIS submitting a bid price of ₱5,229,927.84. Not all lots covered by the mortgaged titles,
however, were sold. Ninety-one (91) lots were expressly excluded from the auction since the
lots were sufficient to pay for all the mortgage debts. A Certificate of Sale (Annex "F,"
Records, Vol. I, pp. 23-28) was issued by then Provincial Sheriff Nicanor D. Salaysay.

The Certificate of Sale dated August 14, 1974 had been annotated and inscribed in TCT
Nos. 26105, 37177 and 50356, with the following notations: "(T)he following lots which form
part of this title (TCT No. 26105) are not covered by the mortgage contract due to sale to
third parties and donation to the government: 50-H-5-C-9-J-65-H-8, 50-H-5-C-9J-M-7; 50-H-
5-C-9-J-65-H-5; 1 lots Nos. 1 to 13, Block No. 1 –-6,138 sq.m. 2. Lots Nos. 1 to 11, Block
No. 2 –4,660 sq.m. 3. Lot No. 15, Block No. 3 –487 sq.m. 4. Lot No. 17, Block No. 4 –263
sq.m. 5. Lot No. 1, Block No. 7 – 402 sq.m. 6. Road Lots Nos. 1, 2, 3, & 4 – 2,747 sq.m."

In another "NOTE: The following lots in the Antonio Subdivision were already released by the
GSIS and therefore are not included in this sale, namely: LOT NO. 1, 6, 7, 8, 9, 10, and 13
(Old Plan) Block I; 1, 3, 4, 5, 7, 8 and 10 (Old Plan) Block II; 3, 10, 12 and 13 (New Plan)
Block I (Old Plan) Block III; 7, 14 and 20 (New Plan) Block III (Old Plan) Block V; 13 and 20
(New Plan) Block IV (Old Plan) Block VI; 1, 2, 3 and 10 (New Plan) Block V (Old Plan) Block
VII; 1, 5, 8, 15, 26 and 27 (New Plan) Block VI (Old Plan) Block VIII; 7, 12 and 20 (New Plan)
Block VII (Old Plan) Block II; 1, 4 and 6 (New Plan) Block VIII (Old Plan) Block X; 5 (New
Plan) Block X (Old Plan) Block ZXII; 6 (New Plan) Block XI (Old Plan) Block XII; 1, Block 9;
12 Block 1; 11 Block 2; 19 Block 1; 10 Block 6; 23 Block 3."
And the lots on "ADDITIONAL EXCLUSION FROM PUBLIC SALE" are "LOTS NO. 6 Block
4; 2 Block 2; 5 Block 5; 1, 2 and 3 Block 11, 1, 2, 3 and 4 Block 10; 5 Block 11 (New); 1
Block 3; 5 Block 1; 15 Block 7; 11 Block 9; 13 Block 5; 12 Block 5; 3 Block 10; 6."

On November 25, 1975, an Affidavit of Consolidation of Ownership (Annex "G," Records,


Vol. I, pp. 29-31) was executed by defendant GSIS over Zulueta’s lots, including the lots,
which as earlier stated, were already excluded from the foreclosure.

On March 6, 1980, defendant GSIS sold the foreclosed properties to Yorkstown


Development Corporation which sale was disapproved by the Office of the President of the
Philippines. The sold properties were returned to defendant GSIS.

The Register of Deeds of Rizal cancelled the land titles issued to Yorkstown Development
Corporation. On July 2, 1980, TCT No. 23552 was issued cancelling TCT No. 21926; TCT
No. 23553 cancelled TCT No. 21925; and TCT No. 23554 cancelling TCT No. 21924, all in
the name of defendant GSIS. 1awphi1.nét

After defendant GSIS had re-acquired the properties sold to Yorkstown Development
Corporation, it began disposing the foreclosed lots including the excluded ones.

On April 7, 1990, representative Eduardo Santiago and then plaintiff Antonio Vic Zulueta
executed an agreement whereby Zulueta transferred all his rights and interests over the
excluded lots. Plaintiff Eduardo Santiago’s lawyer, Atty. Wenceslao B. Trinidad, wrote a
demand letter dated May 11, 1989 (Annex "H," Records, Vol. I, pp. 32-33) to defendant GSIS
asking for the return of the eighty-one (81) excluded lots.2

On May 7, 1990, Antonio Vic Zulueta, represented by Eduardo M. Santiago, filed with the
Regional Trial Court (RTC) of Pasig City, Branch 71, a complaint for reconveyance of real
estate against the GSIS. Spouses Alfeo and Nenita Escasa, Manuel III and Sylvia G.
Urbano, and Marciana P. Gonzales and the heirs of Mamerto Gonzales moved to be
included as intervenors and filed their respective answers in intervention. Subsequently, the
petitioner, as defendant therein, filed its answer alleging inter alia that the action was barred
by the statute of limitations and/or laches and that the complaint stated no cause of action.
Subsequently, Zulueta was substituted by Santiago as the plaintiff in the complaint a quo.
Upon the death of Santiago on March 6, 1996, he was substituted by his widow, Rosario
Enriquez Vda. de Santiago, as the plaintiff.

After due trial, the RTC rendered judgment against the petitioner ordering it to reconvey to
the respondent, Rosario Enriquez Vda. de Santiago, in substitution of her deceased husband
Eduardo, the seventy-eight lots excluded from the foreclosure sale. The dispositive portion
1awphi1.nét

of the RTC decision reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the defendant:

1. Ordering defendant to reconvey to plaintiff the seventy-eight (78) lots released and
excluded from the foreclosure sale including the additional exclusion from the public
sale, namely:

a. Lot Nos. 1, 6, 7, 8, 0, 10, 13, Block I (Old Plan).

b. Lot Nos. 1, 3, 4, 5, 7, 8 and 10, Block II (Old Plan).


c. Lot Nos. 3, 10, 12, and 13, Block I (New Plan), Block III (Old Plan),

d. Lot Nos. 7, 14 and 20, Block III (New Plan), Block V (Old Plan).

e. Lot Nos. 13 and 20, Block IV (New Plan), Block VI (Old Plan).

f. Lot Nos. 1, 2, 3 and 10, Block V (New Plan), Block VII (Old Plan).

g. Lot Nos. 1, 5, 8, 15, 26 and 27, Block VI (New Plan), Block VIII (Old Plan).

h. Lot Nos. 7 and 12, Block VII (New Plan), Block II (Old Plan).

i. Lot Nos. 1, 4 and 6, Block VIII (New Plan), Block X (Old Plan).

j. Lot 5, Block X (New Plan), Block XII (Old Plan).

k. Lot 6, Block XI (New Plan), Block XII (Old Plan).

l. Lots 2, 5, 12 and 15, Block I.

m. Lots 6, 9 and 11, Block 2.

n. Lots 1, 5, 6, 7, 16 and 23, Block 3.

o. Lot 6, Block 4.

p. Lots 5, 12, 13 and 24, Block 5.

q. Lots 10 and 16, Block 6.

r. Lots 6 and 15, Block 7.

s. Lots 13, 24, 28 and 29, Block 8.

t. Lots 1, 11, 17 and 22, Block 9.

u. Lots 1, 2, 3 and 4, Block 10.

v. Lots 1, 2, 3 and 5 (New), Block 11.

2. Ordering defendant to pay plaintiff, if the seventy-eight (78) excluded lots could not
be reconveyed, the fair market value of each of said lots.

3. Ordering the Registry of Deeds of Pasig City to cancel the land titles covering the
excluded lots in the name of defendant or any of its successors-in-interest including
all derivative titles therefrom and to issue new land titles in plaintiff’s name.

4. Ordering the Registry of Deeds of Pasig City to cancel the Notices of Lis Pendens
inscribed in TCT No. PT-80342 under Entry No. PT-12267/T-23554; TCT No. 81812
under Entry No. PT-12267/T-23554; and TCT No. PT-84913 under Entry No. PT-
12267/T-23554.

5. Costs of suit.3

The petitioner elevated the case to the CA which rendered the assailed decision affirming
that of the RTC. The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the herein appeal is DISMISSED for lack of merit. The
Decision of December 17, 1997 of Branch 71 of the Regional Trial Court of Pasig City is
hereby AFFIRMED.4

The petitioner moved for a reconsideration of the aforesaid decision but the same was
denied in the assailed CA Resolution of September 5, 2002.

The petitioner now comes to this Court alleging that:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT A)


PETITIONER WAS GUILTY OF BAD FAITH WHEN IN TRUTH AND IN FACT, THERE WAS
NO SUFFICIENT GROUND TO SUPPORT SUCH CONCLUSION; AND B) THERE WAS
NO PRESCRIPTION IN THIS CASE.5

In its petition, the petitioner maintains that it did not act in bad faith when it erroneously
included in its certificate of sale, and subsequently consolidated the titles in its name over the
seventy-eight lots ("subject lots") that were excluded from the foreclosure sale. There was no
proof of bad faith nor could fraud or malice be attributed to the petitioner when it erroneously
caused the issuance of certificates of title over the subject lots despite the fact that these
were expressly excluded from the foreclosure sale.

The petitioner asserts that the action for reconveyance instituted by the respondent had
already prescribed after the lapse of ten years from November 25, 1975 when the petitioner
consolidated its ownership over the subject lots. According to the petitioner, an action for
reconveyance based on implied or constructive trust prescribes in ten years from the time of
its creation or upon the alleged fraudulent registration of the property. In this case, when the
action was instituted on May 7, 1990, more than fourteen years had already lapsed. Thus,
the petitioner contends that the same was already barred by prescription as well as laches.

The petitioner likewise takes exception to the holding of the trial court and the CA that it (the
petitioner) failed to apprise or return to the Zuluetas, the respondent’s predecessors-in-
interest, the seventy-eight lots excluded from the foreclosure sale because the petitioner had
no such obligation under the pertinent loan and mortgage agreement.

The petitioner’s arguments fail to persuade. 1aw phi 1.nét

At the outset, it bears emphasis that the jurisdiction of this Court in a petition for review on
certiorari under Rule 45 of the Rules of Court, as amended, is limited to reviewing only errors
of law. This Court is not a trier of facts. Case law has it that the findings of the trial court
especially when affirmed by the CA are binding and conclusive upon this Court. Although
there are exceptions to the said rule, we find no reason to deviate therefrom.6 By assailing
the findings of facts of the trial court as affirmed by the CA, that it acted in bad faith, the
petitioner thereby raised questions of facts in its petition.
Nonetheless, even if we indulged the petition and delved into the factual issues, we find the
petition barren of merit.

That the petitioner acted in bad faith in consolidating ownership and causing the issuance of
titles in its name over the subject lots, notwithstanding that these were expressly excluded
from the foreclosure sale was the uniform ruling of the trial court and appellate court. As
declared by the CA:

The acts of defendant-appellant GSIS in concealing from the Zuluetas [the respondent’s
predecessors-in-interest] the existence of these lots, in failing to notify or apprise the
spouses Zulueta about the excluded lots from the time it consolidated its titles on their
foreclosed properties in 1975, in failing to inform them when it entered into a contract of sale
of the foreclosed properties to Yorkstown Development Corporation in 1980 as well as when
the said sale was revoked by then President Ferdinand E. Marcos during the same year
demonstrated a clear effort on its part to defraud the spouses Zulueta and appropriate for
itself the subject properties. Even if titles over the lots had been issued in the name of the
defendant-appellant, still it could not legally claim ownership and absolute dominion over
them because indefeasibility of title under the Torrens system does not attach to titles
secured by fraud or misrepresentation. The fraud committed by defendant-appellant in the
form of concealment of the existence of said lots and failure to return the same to the real
owners after their exclusion from the foreclosure sale made defendant-appellant holders in
bad faith. It is well-settled that a holder in bad faith of a certificate of title is not entitled to the
protection of the law for the law cannot be used as a shield for fraud.7

The Court agrees with the findings and conclusion of the trial court and the CA. The
petitioner is not an ordinary mortgagee. It is a government financial institution and, like
banks, is expected to exercise greater care and prudence in its dealings, including those
involving registered lands.8 The Court’s ruling in Rural Bank of Compostela v. CA9 is apropos:

Banks, indeed, should exercise more care and prudence in dealing even with registered
lands, than private individuals, for their business is one affected with public interest, keeping
in trust money belonging to their depositors, which they should guard against loss by not
committing any act of negligence which amounts to lack of good faith by which they would be
denied the protective mantle of land registration statute, Act [No.] 496, extended only to
purchasers for value and in good faith, as well as to mortgagees of the same character and
description.10

Due diligence required of banks extend even to persons, or institutions like the petitioner,
regularly engaged in the business of lending money secured by real estate mortgages.11

In this case, the petitioner executed an affidavit in consolidating its ownership and causing
the issuance of titles in its name over the subject lots despite the fact that these were
expressly excluded from the foreclosure sale. By so doing, the petitioner acted in gross and
evident bad faith. It cannot feign ignorance of the fact that the subject lots were excluded
from the sale at public auction. At the least, its act constituted gross negligence amounting to
bad faith. Further, as found by the CA, the petitioner’s acts of concealing the existence of
these lots, its failure to return them to the Zuluetas and even its attempt to sell them to a third
party is proof of the petitioner’s intent to defraud the Zuluetas and appropriate for itself the
subject lots.

On the issue of prescription, generally, an action for reconveyance of real property based on
fraud prescribes in four years from the discovery of fraud; such discovery is deemed to have
taken place upon the issuance of the certificate of title over the property. Registration of real
property is a constructive notice to all persons and, thus, the four-year period shall be
counted therefrom.12 On the other hand, Article 1456 of the Civil Code provides:

Art. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force
of law, considered a trustee of an implied trust for the benefit of the person from whom the
property comes.

An action for reconveyance based on implied or constructive trust prescribes in ten years
from the alleged fraudulent registration or date of issuance of the certificate of title over the
property.13

The petitioner’s defense of prescription is untenable. As held by the CA, the general rule that
the discovery of fraud is deemed to have taken place upon the registration of real property
because it is "considered a constructive notice to all persons" does not apply in this case.
The CA correctly cited the cases of Adille v. Court of Appeals14 and Samonte v. Court of
Appeals,15 where this Court reckoned the prescriptive period for the filing of the action for
reconveyance based on implied trust from the actual discovery of fraud.

In ruling that the action had not yet prescribed despite the fact that more than ten years had
lapsed between the date of registration and the institution of the action for reconveyance, the
Court in Adille ratiocinated:

It is true that registration under the Torrens system is constructive notice of title, but it has
likewise been our holding that the Torrens title does not furnish a shield for fraud. It is
therefore no argument to say that the act of registration is equivalent to notice of repudiation,
assuming there was one, notwithstanding the long-standing rule that registration operates as
a universal notice of title.

For the same reason, we cannot dismiss private respondents’ claims commenced in 1974
over the estate registered in 1955. While actions to enforce a constructive trust prescribes in
ten years, reckoned from the date of the registration of the property, we, as we said, are not
prepared to count the period from such a date in this case. We note the petitioner’s sub rosa
efforts to get hold of the property exclusively for himself beginning with his fraudulent
misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir
and child of his mother Feliza with the consequence that he was able to secure title in his
name [alone]." Accordingly, we hold that the right of the private respondents commenced
from the time they actually discovered the petitioner’s act of defraudation. According to the
respondent Court of Appeals, they "came to know [of it] apparently only during the progress
of the litigation." Hence, prescription is not a bar.16

The above ruling was reiterated in the more recent case of Samonte. In this case, as
established by the CA, the respondent actually discovered the fraudulent act of the petitioner
only in 1989:

... [T]he prescriptive period of the action is to be reckoned from the time plaintiff-appellee
(then Eduardo M. Santiago) had actually discovered the fraudulent act of defendant-
appellant which was, as borne out by the records, only in 1989. Plaintiff-appellee Eduardo M.
Santiago categorically testified (TSN of July 11, 1995, pp. 14-15) that he came to know that
there were 91 excluded lots in Antonio Village which were foreclosed by the GSIS and
included in its consolidation of ownership in 1975 when, in 1989, he and Antonio Vic Zulueta
discussed it and he was given by Zulueta a special power of attorney to represent him to
recover the subject properties from GSIS. The complaint for reconveyance was filed barely a
year from the discovery of the fraud.17

Following the Court’s pronouncements in Adille and Samonte, the institution of the action for
reconveyance in the court a quo in 1990 was thus well within the prescriptive period. Having
acted in bad faith in securing titles over the subject lots, the petitioner is a holder in bad faith
of certificates of title over the subject lots. The petitioner is not entitled to the protection of the
law for the law cannot be used as a shield for frauds.18

Contrary to its claim, the petitioner unarguably had the legal duty to return the subject lots to
the Zuluetas. The petitioner’s attempts to justify its omission by insisting that it had no such
duty under the mortgage contract is obviously clutching at straw. Article 22 of the Civil Code
explicitly provides that "every person who, through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him."

WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated
1a\^ /phi1.net

February 22, 2002 and Resolution dated September 5, 2002 of the Court of Appeals in CA-
G.R. CV No. 62309 are AFFIRMED IN TOTO. Costs against the petitioner.

SO ORDERED.
G.R. No. 182865 December 24, 2008

ROMULO F. PECSON, petitioner,


vs.
COMMISSION ON ELECTIONS, DEPARTMENT OF INTERIOR AND LOCAL
GOVERNMENT and LYNDON A. CUNANAN, respondents.

DECISION

BRION, J.:

This petition for certiorari - filed by Romulo F. Pecson (Pecson) under Rule 64, in relation
with Rule 65 of the Revised Rules of Court - seeks to set aside and annul the Resolution
dated May 21, 2008 of the Commission on Elections en banc (COMELEC) in SPR 60-
2007.1 The assailed Resolution nullified the grant (via a Special Order) by the Regional Trial
Court (RTC), Branch 56, Angeles City, of the execution pending appeal of its Decision in the
election contest between Pecson and the private respondent Lyndon A. Cunanan
(Cunanan), the proclaimed winner in the 2007 mayoralty election in Magalang, Pampanga.

THE ANTECEDENTS

Pecson and Cunanan were candidates for the mayoralty position in the Municipality of
Magalang, Province of Pampanga in the May 2007 elections. On May 17, 2007, Cunanan
was proclaimed the winning candidate, garnering a total of 12,592 votes as against Pecson's
12,531, or a margin of 61 votes. Cunanan took his oath and assumed the position of Mayor
of Magalang. Soon thereafter, Pecson filed an election protest, docketed as EPE No. 07-51,
with the RTC.

On November 23, 2007, the RTC rendered a Decision in Pecson's favor. The RTC ruled that
Pecson received a total of 14,897 votes as against Cunanan's 13,758 - a vote margin of
1,139.

Cunanan received a copy of the Decision on November 26, 2007 and filed a Notice of
Appeal the day after. The RTC issued on November 27, 2008 an Order noting the filing of
the notice of appeal and the payment of appeal fee and directing the transmittal of the
records of the case to the Electoral Contests Adjudication Department (ECAD) of the
COMELEC. Pecson, on the other hand, filed on November 28, 2007 an Urgent Motion for
Immediate Execution Pending Appeal, claiming that Section 11, Rule 14 of the Rules of
Procedure in Election Contests before the Courts Involving Elective Municipal and Barangay
Officials2 (Rules) allows this remedy.

The RTC granted Pecson's motion for execution pending appeal via a Special Order dated
December 3, 2007 (Special Order) but suspended, pursuant to the Rules, the actual
issuance of the writ of execution for twenty (20) days. The Special Order states the following
reasons:

1. The result of the judicial revision show[s] that the protestant garnered 14,897 votes
as against protestee's 13,758 votes or a plurality of 1,139 votes. The victory of the
protestant is clearly and manifestly established by the rulings and tabulation of
results made by the Court x x x;
2. It is settled jurisprudence that execution pending appeal in election cases should
be granted "to give as much recognition to the worth of a trial judge's decision as that
which is initially ascribed by the law to the proclamation by the board of canvassers."
The Court holds that this wisp of judicial wisdom of the Supreme Court enunciated in
the Gahol case and subsequent cases citing it is borne by the recognition that the
decision of the trial court in an election case is nothing but the court upholding the
mandate of the voter, which has as its source no other than the exercise of the
constitutional right to vote. While it is true that the protestee can avail of the remedy
of appeal before the COMELEC, the Court is more convinced that between
upholding the mandate of the electorate of Magalang, Pampanga which is the fruit of
the exercise of the constitutional right to vote and a procedural remedy, the Court is
more inclined to uphold and give effect to and actualize the mandate of the electorate
of Magalang. To the mind of the Court, in granting execution pending appeal the
Court is being true to its bounden duty to uphold the exercise of constitutional rights
and gives flesh to the mandate of the people. The foregoing is, as far as the Court is
concerned, considered far superior circumstance that convinces the Court to grant
protestant's motion;

3. Public interest and the will of the electorate must be respected and given meaning;

4. In the case of Navarosa v. Comelec, the Supreme Court held that "In
the Gahol case, the Court gave an additional justification for allowing execution
pending appeal of decisions of trial courts, thus: Public policy underlies it, x x x
[S]omething had to be done to strike the death blow at the pernicious grab-the-
proclamation-prolong-the-protest technique often, if not invariably, resorted to by
unscrupulous politicians who would render nugatory the people's verdict against
them and persist in continuing in an office they very well know they have no
legitimate right to hold. x x x." A primordial public interest is served by the grant of the
protestant's motion, i.e., to obviate a hollow victory for the duly elected candidate. In
the words of Chief Justice Cesar Bengzon, "The well known delay in the adjudication
of election protests often gave the successful contestant a mere pyrrhic victory, i.e., a
vindication when the term of office is about to expire or has expired."

Expectedly, Cunanan moved to reconsider the Order, arguing that the RTC gravely abused
its discretion: (1) in ruling that there were good reasons to issue a writ of execution pending
appeal; and (2) in entertaining and subsequently granting the motion for execution pending
appeal despite the issuance of an order transmitting the records of the case.

Thereupon, Cunanan filed with the COMELEC a Petition for Application of Preliminary
Injunction with Prayer for Status Quo Ante Order/Temporary Restraining Order (TRO) with
Prayer for Immediate Raffle. He argued in his petition that: (1) the RTC Decision did not
clearly establish Pecson's victory or his (Cunanan's) defeat - a requirement of Section 11,
Rule 14 of the Rules; among other reasons, the number of votes the RTC tallied and
tabulated exceeded the number of those who actually voted and the votes cast for the
position of Mayor, and (2) the RTC had constructively relinquished its jurisdiction by the
issuance of the Order dated November 27, 2007 directing the transmittal of the records of
the case.

The Second Division of the COMELEC issued on January 4, 2008 a 60-day TRO directing:
(1) the RTC to cease and desist from issuing or causing the issuance of a writ of execution
or implementing the Special Order; and (2) Cunanan to continue performing the functions of
Mayor of Magalang.
In his Answer and/or Opposition, with Prayer for Immediate Lifting of TRO, Pecson argued
that: (1) preliminary injunction cannot exist except as part or incident of an independent
action, being a mere ancillary remedy that exists only as an incident of the main proceeding;
(2) the "petition for application of preliminary injunction," as an original action, should be
dismissed outright; and (3) Cunanan is guilty of forum shopping, as he filed a motion for
reconsideration of the Special Order simultaneously with the petition filed with the
COMELEC.

The COMELEC's Second Division denied Cunanan's petition in a Resolution dated March 6,
2008. It ruled that: (1) the resolution of the motion for execution pending appeal is part of the
residual jurisdiction of the RTC to settle pending incidents; the motion was filed prior to the
expiration of the period to appeal and while the RTC was still in possession of the original
record; and (2) there is good reason to justify the execution of the Decision pending appeal,
as Pecson's victory was clearly and manifestly established. Ruling on the alleged defect in
the RTC count, the Second Division ruled:

[A]fter a careful scrutiny of the Decision, We found that the error lies in the trial
court's computation of the results. In its Decision, the trial court, to the votes obtained
by the party (as per proclamation of the MBOC), deducted the votes per physical
count after revision and deducted further the invalid/nullified ballots per the trial
court's appreciation and thereafter added the valid claimed ballots per the trial court's
appreciation, thus:

Votes obtained per proclamation of the MBOC (-) Votes per physical count (-) Invalid
or nullified ballots (+) Valid claimed ballots = Total Votes Obtained

The formula used by the trial court is erroneous as it used as its reference the votes
obtained by the parties as per the proclamation of the MBOC. It complicated an
otherwise simple and straightforward computation, thus leading to the error. The
correct formula should have been as follows:

Total Number of Uncontested Ballots (+) Valid Contested Ballots (+) Valid Claimed
Ballots = Total Votes Obtained

Using this formula and applying the figures in pages 744 and 745 of the trial court's
Decision, the results will be as follows:

For the Petitioner Cunanan

Total Number of Uncontested Ballots 9,656

Add: Valid Contested Ballots 2,058

Add: Valid Claimed Ballots 36

Total Votes of Petitioner 11,750

For the Private Respondent (Pecson)


Total Number of Uncontested Ballots 9,271

Add: Valid Contested Ballots 2,827

Add: Valid Claimed Ballots 39

Total Votes of Petitioner 12,134

Using the correct formula, private respondent still obtained a plurality of the votes
cast and enjoys a margin of 384 votes over the petitioner. Although not as wide as
the margin found by the trial court, We are nevertheless convinced that the victory of
private respondent has been clearly established in the trial court's decision for the
following reasons:

First, the error lies merely in the computation and does not put in issue the
appreciation and tabulation of votes. The error is purely mathematical which
will not involve the opening of ballot boxes or an examination and appreciation
of ballots. It is a matter of arithmetic which calls for the mere clerical act of
reflecting the true and correct votes of the candidates.

Second, the error did not affect the final outcome of the election protest as to
which candidate obtained the plurality of the votes cast.

We are likewise convinced that the assailed order states good or special reasons
justifying the execution pending appeal, to wit:

(1) The victory of the protestant was clearly and manifestly established;

(2) Execution pending appeal in election cases should be granted to give as


much recognition to the worth of a trial judge's decision as that which is
initially ascribed by the law to the proclamation by the board of canvassers;

(3) Public interest and the will of the electorate must be respected and given
meaning; and

(4) Public policy underlies it, as something had to be done to strike the death
blow at the pernicious grab-the-proclamation-prolong-the-protest technique
often, if not invariably resorted to by unscrupulous politicians.

Such reasons to Our mind constitute superior circumstances as to warrant the


execution of the trial court's decision pending appeal.

Pecson thus asked for the issuance of a writ of execution via an Ex-Parte Motion. Despite
Cunanan's opposition, the RTC granted Pecson's motion and issued the writ of execution on
March 11, 2008. Pecson thereafter assumed the duties and functions of Mayor of Magalang.

The Assailed Resolution

On Cunanan's motion, the COMELEC en banc issued its Resolution dated May 21, 2008
reversing the ruling of the Second Division insofar as it affirmed the RTC's findings of good
reasons to execute the decision pending appeal. It affirmed the authority of the RTC to order
execution pending appeal; it however nullified the March 11, 2008 writ of execution on the
ground that the RTC could no longer issue the writ because it had lost jurisdiction over the
case after transmittal of the records and the perfection of the appeals of both Cunanan and
Pecson (to be accurate, the lapse of Pecson's period to appeal).

On the propriety of executing the RTC Decision pending appeal, the COMELEC en
banc ruled that it was not convinced of the good reasons stated by the RTC in its Special
Order. It ruled that recognition of the worth of a trial judge's decision, on the one hand, and
the right to appeal, including the Commission's authority to review the decision of the trial
court, on the other, requires a balancing act; and not every invocation of public interest will
suffice to justify an execution pending appeal. It added that at a stage when the decision of
the trial court has yet to attain finality, both the protestee and the protestant are to be
considered "presumptive winners." It noted too that the Second Division already cast a doubt
on the correctness of the number of votes obtained by the parties after the trial court's
revision; thus, the resolution of the pending appeal becomes all the more important. Between
two presumptive winners, considering the pending appeal of the election protest to the
Commission and public service being the prime consideration, the balance should tilt in
favor of non-disruption of government service. The execution of the RTC Decision
pending appeal would necessarily entail the unseating of the protestee, resulting not only in
the disruption of public service, but also in confusion in running the affairs of the government;
a subsequent reversal too of the RTC Decision also results in the unseating of the
protestant. This situation (i.e., the series of turn-over of the seat of power from one
presumptive winner to another) cannot but cause irreparable damage to the people of
Magalang, and overweighs the reasons asserted by the RTC in its Special Order. In the end,
according to the COMELEC, public interest is best served when he who was really voted for
the position is proclaimed and adjudged as winner with finality.

The Petition and the Prayer for the issuance of a Status Quo Order

In imputing grave abuse of discretion to the COMELEC en banc, Pecson argues that: (1) the
RTC Decision clearly showed Pecson's victory; (2) the reasons for the reversal of the RTC
Decision practically render impossible a grant of an execution pending appeal; and (3) the
RTC correctly found the presence of the requisites for execution pending appeal.

Threatened to be unseated, Pecson asked, as interim relief, for the issuance of a Status Quo
Order. He claimed that: (1) the Department of Interior and Local Government already
recognized (based on the issuance of the assailed Resolution) Cunanan's assumption of
office even if the assailed Resolution had not attained finality; and (2) in order to prevent
grave and irreparable injury to Pecson and the perpetuation of a travesty of justice, a Status
Quo Order must immediately issue.

THE COURT'S RULING

We find the petition meritorious.

The remedy of executing court decisions pending appeal in election contests is provided
under the Rules as follows:

SEC. 11. Execution pending appeal. - On motion of the prevailing party with notice to
the adverse party, the court, while still in possession of the original records, may, at
its discretion, order the execution of the decision in an election contest before the
expiration of the period to appeal, subject to the following rules:

(a) There must be a motion by the prevailing party with three-day notice to the
adverse party. Execution pending appeal shall not issue without prior notice and
hearing. There must be good reasons for the execution pending appeal. The court, in
a special order, must state the good or special reasons justifying the execution
pending appeal. Such reasons must:

(1) constitute superior circumstances demanding urgency that will outweigh


the injury or damage should the losing party secure a reversal of the
judgment on appeal; and

(2) be manifest, in the decision sought to be executed, that the defeat of the
protestee or the victory of the protestant has been clearly established.

(b) If the court grants execution pending appeal, an aggrieved party shall have
twenty working days from notice of the special order within which to secure a
restraining order or status quo order from the Supreme Court of the Commission on
Elections. The corresponding writ of execution shall issue after twenty days, if no
restraining order or status quo order is issued. During such period, the writ of
execution pending appeal shall be stayed. 3

This remedy is not new. Under prevailing jurisprudence,4 the remedy may be resorted to
pursuant to the suppletory application of the Rules of Court, specifically its Section 2, Rule
39.5 What the Rules (A.M. No. 07-4-15-C) has done is to give the availability of the remedy
the element of certainty. Significantly, the Rules similarly apply the good reason standard (in
fact, the even greater superior circumstances standard) for execution pending appeal under
the Rules of Court, making the remedy an exception rather than the rule.

At the heart of the present controversy is the question of whether there has been compliance
with the standards required for an execution pending appeal in an election contest. As
heretofore cited, the RTC found all these requisites present. The Second Division of the
COMELEC supported the RTC's ruling, but the COMELEC en bancheld a contrary view and
nullified the execution pending appeal. This en banc ruling is now before us.

Our review of a COMELEC ruling or decision is via a petition for certiorari. This is a limited
review on jurisdictional grounds, specifically of the question on whether the COMELEC has
jurisdiction, or whether the assailed order or resolution is tainted with grave abuse of
discretion amounting to lack or excess of jurisdiction. Correctly understood, grave abuse of
discretion is such "capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or [an] exercise of power in an arbitrary and despotic manner by reason of
passion or personal hostility, or an exercise of judgment so patent and gross as to amount to
an evasion of a positive duty or to a virtual refusal to perform the duty enjoined, or to act in a
manner not at all in contemplation of law."6

Because this case is essentially about the implementation of an RTC decision pending
appeal, we must first dwell on the writ the RTC issued. The COMELEC ruled in this regard
that the writ of execution the RTC issued on March 11, 2008 was void; the RTC could no
longer issue the writ because of the lapse of the period for appeal, and because the RTC no
longer held the records of the election contest which had then been transmitted to the ECAD-
COMELEC.
Cunanan argues in his Comment that this ruling has become final and executory because
Pecson did not question it in the present petition. In Cunanan's view, the finality of this
aspect of the COMELEC ruling renders the issue of the nullification of the Special Order
moot and academic, as any ruling we shall render would serve no practical purpose; it can
no longer be implemented since the means (obviously referring to the writ the RTC issued on
March 11, 2008) of executing the RTC decision (i.e., seating Pecson as Mayor of Magalang)
has, to all intents and purposes, been nullified and rendered ineffective.

We see no merit in Cunanan's argument. The writ of execution issued by the RTC is a mere
administrative enforcement medium of the Special Order - the main order supporting
Pecson's motion for the issuance of a writ of execution. The writ itself cannot and does not
assume a life of its own independent from the Special Order on which it is based. Certainly,
its nullification does not carry with it the nullification of the Special Order. This consequence
does not of course hold true in the reverse situation - the nullification of the Special Order
effectively carries with it the nullification of its implementing writ and removes the basis for
the issuance of another implementing writ. In the present case, the reality is that if and when
we ultimately affirm the validity of the Special Order, nothing will thereafter prevent the RTC
from issuing another writ.

Another legal reality is that the COMELEC is wrong in its ruling that the RTC could no longer
actually issue the writ on March 11, 2008 because it no longer had jurisdiction to do so after
the appeal period lapsed and after the records were transmitted to the ECAD-COMELEC.
That the RTC is still in possession of the records and that the period to appeal (of both
contending parties) must have not lapsed are important for jurisdictional purposes if the issue
is the authority of the RTC to grant a Special Order allowing execution pending appeal; they
are requisite elements for the exercise by the RTC of its residual jurisdiction to validly order
an execution pending appeal, not for the issuance of the writ itself. This is clearly evident
from the cited provision of the Rules which does not require the issuance of the
implementing writ within the above limited jurisdictional period. The RTC cannot legally issue
the implementing writ within this limited period for two reasons: (1) the cited twenty-day
waiting period under Section 11(b); and (2) the mandatory immediate transmittal of the
records to the ECAD of the COMELEC under Section 10 of the Rules.7

On the substantive issue of whether a writ of execution pending appeal should issue, we do
not agree with the COMELEC's view that there are "two presumptive winners" prior to its
ruling on the protest case. We likewise cannot support its "balancing act" view that
essentially posits that given the pendency of the appeal and the lack of finality of a decision
in the election protest, the unseating of the protestee, and the need for continuity of public
service, the balance should tilt in favor of continuity or non-disruption of public service;
hence, the execution pending appeal should be denied.

As Pecson correctly argued, this reasoning effectively prevents a winner (at the level of the
courts) of an election protest from ever availing of an execution pending appeal; it gives too
much emphasis to the COMELEC's authority to decide the election contest and the losing
party's right to appeal. What is there to execute pending appeal if, as the COMELEC
suggested, a party should await a COMELEC final ruling on the protest case? Effectively, the
"two presumptive winners" and the "balancing act" views negate the execution pending
appeal that we have categorically and unequivocally recognized in our rulings and in the
Rules we issued. To be sure, the COMELEC cannot, on its own, render ineffective a rule of
procedure we established by formulating its own ruling requiring a final determination at its
level before an RTC decision in a protest case can be implemented.
We additionally note that "disruption of public service" necessarily results from any order
allowing execution pending appeal and is a concern that this Court was aware of when it
expressly provided the remedy under the Rules. Such disruption is therefore an element that
has been weighed and factored in and cannot be per se a basis to deny execution pending
appeal.

What comes out clearly from this examination of the COMELEC ruling is that it looked at the
wrong material considerations when it nullified the RTC's Special Order. They are the wrong
considerations because they are not the standards outlined under Section 11, Rule 14 of the
Rules against which the validity of a Special Order must be tested. Significantly, the use of
wrong considerations in arriving at a decision constitutes grave abuse of discretion.8

The proper consideration that the COMELEC made relates to the correctness of the RTC's
Decision in light of the Rules' requirement that the victory of the protestant and the defeat of
the protestee be clearly established for execution pending appeal to issue. According to the
COMELEC, no less than the Second Division cast a doubt on the correctness of the number
of votes obtained by the parties after the revision of ballots when the Second Division
proposed a mathematical formula to correct the RTC count. At the same time, the
COMELEC noted that the Second Division could not have corrected the RTC count, as the
petition before it was one for certiorari while the correction of errors in computation properly
pertained to the resolution of Cunanan's pending appeal. To the COMELEC, all these
showed that the correctness of the RTC Decision in favor of Pecson was far from clear and
cannot support an execution pending appeal.

We disagree once more with the COMELEC en banc in this conclusion, as it failed to
accurately and completely appreciate the Second Division's findings. The RTC Decision, on
its face, shows that Pecson garnered more valid votes than Cunanan after the revision of
ballots. The Second Division properly recognized, however, that the RTC computation
suffered from a facial defect that did not affect the final results; as Cunanan pointed out, the
votes for Pecson and Cunanan, if totally summed up, exceeded the total number of valid
votes for mayor.

Duly alerted, the Second Division looked into the purported error, analyzed it, and found the
error to be merely mathematical; the RTC formula would necessarily exceed the total
number of votes cast for mayor because it counted some votes twice. In making this finding,
the Second Division was guided by the rule that one of the requisites for an execution
pending appeal is a clear showing in the decision of the protestant's victory and the
protestee's defeat. Its examination of the RTC Decision was only for this limited purpose and
this was what it did, no more no less. Specifically, it did not review the RTC's appreciation of
the ballots on revision; it did not review the intrinsic merits of the RTC Decision - issues that
properly belong to the appeal that is currently pending. It merely found that the defect
Cunanan noted was actually inconsequential with respect to the results, thus showing
Pecson's clear victory under the RTC Decision. In other words, the Second Division's
corrected view of the RTC count confirmed, rather than contradicted or placed in doubt, the
conclusion that Pecson won.

Other than the clarity of Pecson's victory under the RTC Decision, the Special Order cited
good and special reasons that justified an execution pending appeal, specifically: (1) the
need to give as much recognition to the worth of a trial judge's decision as that which is
initially given by the law to the proclamation by the board of canvassers; (2) public interest
and/or respect for and giving meaning to the will of the electorate; and (3) public policy -
something had to be done to deal a death blow to the pernicious grab-the-proclamation-
prolong-the-protest technique often, if not invariably, resorted to by unscrupulous politicians
who would render nugatory the people's verdict against them.

Unfortunately, the COMELEC en banc simply glossed over the RTC's cited reasons and did
not fully discuss why these reasons were not sufficient to justify execution pending appeal. A
combination, however, of the reasons the RTC cited, to our mind, justifies execution of the
RTC Decision pending appeal.

A striking feature of the present case is the time element involved. We have time and again
noted the well known delay in the adjudication of election contests that, more often than not,
gives the protestant an empty or hollow victory in a long drawn-out legal battle.9 Some
petitions before us involving election contests have been in fact dismissed for being moot,
the term for the contested position having long expired before the final ruling on the merits
came.10 In the present case, the term for mayor consists of only three (3) years. One year
and six months has lapsed since the May 2007 election; thus, less than two years are left of
the elected mayor's term. The election protest, while already decided at the RTC level, is still
at the execution-pending-appeal stage and is still far from the finality of any decision on the
merits, given the available appellate remedies and the recourses available through special
civil actions. To be sure, there is nothing definite in the horizon on who will finally be declared
the lawfully elected mayor.

Also, we reiterate here our consistent ruling that decisions of the courts in election protest
cases, resulting as they do from a judicial evaluation of the ballots and after full-blown
adversarial proceedings, should at least be given similar worth and recognition as decisions
of the board of canvassers.11 This is especially true when attended by other equally weighty
circumstances of the case, such as the shortness of the term of the contested elective office,
of the case.

In light of all these considerations, we conclude that the COMELEC erred in nullifying the
RTC's Special Order in a manner sufficiently gross to affect its exercise of jurisdiction.
Specifically, it committed grave abuse of discretion when it looked at wrong considerations
and when it acted outside of the contemplation of the law in nullifying the Special Order.

WHEREFORE, premises considered, we GRANT the petition and accordingly ANNUL the
assailed COMELEC Resolution.

SO ORDERED.
G.R. No. 196278 June 17, 2015

CE CASECNAN WATER and ENERGY COMPANY, INC., Petitioner,


vs.
THE PROVINCE OF NUEVA ECIJA, THEOFFICEOFTHEPROVINCIAL ASSESSOR OF
NUEVA ECIJA, and THEOFFICEOFTHEPROVINCIAL TREASURER OF NUEVA ECIJA,
as represented by HON. AURELIO UMALI, HON. FLORANTE FAJARDO and HON.
EDILBERTO PANCHO, respectively, or their lawful successors,Respondents,
NATIONAL IRRIGATION ADMINISTRATION and DEPARTMENT OF FINANCE, As
Necessary Parties.

DECISION

DEL CASTILLO, J.:

The Court of Tax Appeals (CTA) has exclusive jurisdiction over a special civil action for
certiorari assailing an interlocutory order issued by the Regional Trial Court (RTC) in a local
tax case.

This Petition for Review on Certiorari1 assails the November 2, 2010 Decision2 of the Court of
Appeals (CA) in CA-GR SP No. 108441 which dismissed for lack of jurisdiction the Petition
for Certiorari of petitioner CE Casecnan Water and Energy Company, Inc.(petitioner) against
the Province of Nueva Ecija, the Office of the Provincial Assessor of Nueva Ecija (Office of
the Provincial Assessor) and the Office of the Provincial Treasurer of Nueva Ecija (Office of
the Provincial Treasurer) (respondents). Also assailed is the March 24, 2011 Resolution3 of
the CA denying petitioner’s Motion for Reconsideration.4

Factual Antecedents

On June 26, 1995, petitioner and the National Irrigation Administration (NIA) entered into a
build-operate-transfer (BOT) contract known as the "Amended and Restated Casecnan
Project Agreement"5 (Casecnan Contract) relative to the construction and development of the
Casecnan Multi-Purpose Irrigation and Power Project (Casecnan Project) in Pantabangan,
Nueva Ecija and Alfonso Castaneda, Nueva Vizcaya. The Casecnan Project is a combined
irrigation and hydroelectric power generation facility using the Pantabangan Dam in Nueva
Ecija. On September 29, 2003, petitioner and NIA executed a Supplemental
Agreement6 amending Article II of the Casecnan Contract which pertains to payment of
taxes. Article 2.2 thereof states that NIA must reimburse petitioner for real property taxes
(RPT) provided the same was paid upon NIA’s directive and with the concurrence of the
Department of Finance.

On September 6, 2005, petitioner received from the Office of the Provincial Assessor a
Notice of Assessment of Real Property dated August 2, 2005, which indicates that for the
years 2002 to 2005, its RPT due was 248,676,349.60. Petitioner assailed the assessment
with the Nueva Ecija Local Board of Assessment Appeals (Nueva Ecija LBAA) which
dismissed it on January 26, 2006. Undeterred, petitioner filed a Notice of Appeal with the
Nueva Ecija Central Board of Assessment Appeals (Nueva Ecija CBAA). During the
pendency thereof, respondents collected from petitioner the RPT due under the said
assessment as well as those pertaining to the years 2006 up to the second quarter of 2008,
totalling ₱363,703,606.88. Petitioner paid the assessed RPT under protest; it also initiated
proceedings questioning the validity of the collection with respect to the years 2006 up to the
second quarter of 2008. Thereafter, petitioner received a letter7 dated July 9, 2008 from the
Office of the Provincial Treasurer stating that it has RPT in arrears for the years 2002 up to
the second quarter of 2008 amounting to ₱1,277,474,342.10. Petitioner received another
letter8 dated August 29, 2008 from the same office clarifying that its arrearages in RPT
actually amounted to ₱1,279,997,722.70 (2008 RPT Reassessment). Again, petitioner
questioned this assessment through an appeal before the Nueva Ecija LBAA. While the
same was pending, petitioner received from respondents a letter dated September 10, 2008
demanding payment for its alleged RPT arrearages.

Hence, on September 23, 2008, petitioner filed with the RTC of San Jose City, Nueva Ecija a
Complaint9 for injunction and damages with application for temporary restraining order (TRO)
and preliminary injunction10 praying to restrain the collection of the 2008 RPT Reassessment.
Petitioner emphasized, among others, that it was not the one which should pay the taxes but
NIA.

Ruling of the Regional Trial Court

On September 24, 2008, the RTC denied petitioner’s application for a 72-hour
TRO.11 Meanwhile, petitioner received from the Office of the Provincial Treasurer a letter
dated September 22, 2008 further demanding payment for RPT covering the third quarter of
2008 (2008-3Q Assessment). Thus, petitioner filed on September 29, 2008 an Amended
Complaint12 asking the RTC to likewise enjoin respondents from collecting RPT based on the
2008-3Q Assessment in the amount of ₱53,346,755.18.

On October 2, 2008, the RTC issued a 20-day TRO13 enjoining respondents from collecting
from petitioner the RPT covered by the 2008 RPT Reassessment amounting to
₱1,279,997,722.70, including surcharges and penalties.

Subsequently, however, the RTC denied petitioner’s application for writ of preliminary
injunction in its Order14 of October 24, 2008.It also denied petitioner’s Motion for
Reconsideration thereof in an Order15 dated January 30, 2009.

On April 24, 2009, petitioner filed with the CA a Petition for Certiorari16 under Rule 65 of the
Rules of Court seeking to annul and set aside the aforementioned October 24, 2008 and
January 30, 2009 RTC Orders.

Ruling of the Court of Appeals

In its November 2, 2010 Decision,17 the CA observed that the Petition for Certiorari before it
was actually an offshoot of the 2008 RPT Reassessment. And since in resolving the issue of
whether the RTC committed grave abuse of discretion in denying petitioner’s application for
a writ of preliminary injunction, the issue of the validity of the assessment and the collection
of the RPT against petitioner must also be resolved, thus jurisdiction over the case lies within
the Court of Tax Appeals (CTA).Hence, the CA ruled:

WHEREFORE, premises considered, the Petition for Certiorari is hereby DENIED DUE
COURSE and accordingly, DISMISSED for lack of jurisdiction.

SO ORDERED.18

Petitioner sought reconsideration; however, it was denied in a Resolution19 dated March 24,
2011.
Undaunted, petitioner filed this Petition imputing upon the CA grave error in:

x x x ruling that it is the Court of Tax Appeals (and not the Court of Appeals) which has
jurisdiction over the CA Injunction Case.20

Petitioner’s Arguments

In its Petition21 and Reply,22 petitioner argues that it is the CA, not the CTA, which has
jurisdiction over the subject matter of its Petition for Certiorari. Petitioner maintains that its
petition relates to an ordinary civil action for injunction and not to a local tax case. It insists
that in both the RTC injunction case and the Petition for Certiorari before the CA, petitioner
was not protesting respondents’ assessment of RPT against it; what it was seeking was
respondents’ enjoinment from committing or continuing to commit acts that would probably
violate its right. In particular, petitioner points out that the RTC injunction case was intended
to enjoin respondents from collecting payment during the pendency of the case with the
LBAA challenging the validity of the 2008 RPT Reassessment. Petitioner explains that the
said injunction case was filed with the RTC because the LBAA has no injunctive power.

Respondents’ Arguments

In their Comment,23 respondents argue that in resolving the issue on the propriety of issuing
a writ of injunction, the CA will have to inevitably pass upon the propriety of the assessment
of RPT on the Casecnan Project, a local tax matter which is within the jurisdiction of the
CTA. Respondents also echo the CA pronouncement that petitioner failed to exhaust
administrative remedies with respect to the assessment and collection of RPT.

Our Ruling

There is no merit in the Petition.

It is the CTA which has the power to rule


on a Petition for Certiorari assailing an
interlocutory order of the RTC relating
to a local tax case.

Jurisdiction over the subject matter is required for a court to act on any controversy. It is
conferred by law and not by the consent or waiver upon a court. As such, if a court lacks
jurisdiction over an action, it cannot decide the case on the merits and must dismiss it.24

With respect to the CTA, its jurisdiction was expanded and its rank elevated to that of a
collegiate court with special jurisdiction by virtue of Republic Act No. 9282.25 This expanded
jurisdiction of the CTA includes its exclusive appellate jurisdiction to review by appeal the
decisions, orders or resolutions of the RTC in local tax cases originally decided or resolved
by the RTC in the exercise of its original or appellate jurisdiction.26

In the recent case of City of Manila v. Grecia-Cuerdo,27 the Court ruled that the CTA likewise
has the jurisdiction to issue writs of certiorari or to determine whether there has been grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC in
issuing an interlocutory order in cases falling within the CTA’s exclusive appellate
jurisdiction, thus:
The foregoing notwithstanding, while there is no express grant of such power, with respect to
the CTA, Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial
power shall be vested in one Supreme Court and in such lower courts as may be established
by law and that judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the
power of the CTA includes that of determining whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax court.
It, thus, follows that the CTA, by constitutional mandate, is vested with jurisdiction to issue
writs of certiorari in these cases.28 (Citations omitted and emphasis supplied)

Further, the Court in City of Manila, citing J. M. Tuason & Co., Inc. v. Jaramillo,29 De Jesus v.
Court of Appeals,30 as well as the more recent cases of Galang, Jr. v. Hon. Judge
Geronimo31 and Bulilis v. Nuez,32 held that:

Consistent with the above pronouncement, this Court has held as early as the case of J.M.
Tuason & Co., Inc. v. Jaramillo, et al. that ‘if a case may be appealed to a particular court or
judicial tribunal or body, then said court or judicial tribunal or body has jurisdiction to issue
the extraordinary writ of certiorari, in aid of its appellate jurisdiction.’ This principle was
affirmed in De Jesus v. Court of Appeals, where the Court stated that ‘a court may issue a
writ of certiorari in aid of its appellate jurisdiction if said court has jurisdiction to review, by
appeal or writ of error, the final orders or decisions of the lower court.’ The rulings in J.M.
Tuason and De Jesus were reiterated in the more recent cases of Galang, Jr. v. Geronimo
and Bulilis v. Nuez.

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law,
jurisdiction is conferred on a court or judicial officer, all auxiliary writs, processes and other
means necessary to carry it into effect may be employed by such court or officer.33 (Citations
omitted)

Anent petitioner’s contention that it is the CA which has jurisdiction over a certiorari petition
assailing an interlocutory order issued by the RTC in a local tax case, the Court had this to
say: If this Court were to sustain petitioners’ contention that jurisdiction over their certiorari
petition lies with the CA, this Court would be confirming the exercise by two judicial bodies,
the CA and the CTA, of jurisdiction over basically the same subject matter – precisely the
split-jurisdiction situation which is anathema to the orderly administration of justice. The
Court cannot accept that such was the legislative motive, especially considering that the law
expressly confers on the CTA, the tribunal with the specialized competence over tax and
tariff matters, the role of judicial review over local tax cases without mention of any other
court that may exercise such power. Thus, the Court agrees with the ruling of the CA that
since appellate jurisdiction over private respondents’ complaint for tax refund is vested in the
CTA, it follows that a petition for certiorari seeking nullification of an interlocutory order
issued in the said case should, likewise, be filed with the same court. To rule otherwise
would lead to an absurd situation where one court decides an appeal in the main case while
another court rules on an incident in the very same case.

xxxx
A grant of appellate jurisdiction implies that there is included in it the power necessary to
exercise it effectively, to make all orders that will preserve the subject of the action, and to
give effect to the final determination of the appeal. It carries with it the power to protect that
jurisdiction and to make the decisions of the court thereunder effective. The court, in aid of its
appellate jurisdiction, has authority to control all auxiliary and incidental matters necessary to
the efficient and proper exercise of that jurisdiction. For this purpose, it may, when
necessary, prohibit or restrain the performance of any act which might interfere with the
proper exercise of its rightful jurisdiction in cases pending before it.34 (Citations omitted and
emphasis supplied) Given these, it is settled that it is the CTA which has exclusive
jurisdiction over a special civil action for certiorari assailing an interlocutory order issued by
the RTC in a local tax case.

The RTC injunction case is a local tax >case.

In maintaining that it is the CA that has jurisdiction over petitioner’s certiorari petition, the
latter argues that the injunction case it filed with the RTC is not a local tax case but an
ordinary civil action. It insists that it is not protesting the assessment of RPT against it but
only prays that respondents be enjoined from collecting the same.

The Court finds, however, that in praying to restrain the collection of RPT, petitioner also
implicitly questions the propriety of the assessment of such RPT. This is because in ruling
1aw p++i1

as to whether to restrain the collection, the RTC must first necessarily rule on the propriety of
the assessment. In other words, in filing an action for injunction to restrain collection,
petitioner was in effect also challenging the validity of the RPT assessment. As aptly
discussed by the CA:

x x x [T]he original action filed with the RTC is one for Injunction, with an application for
Temporary Restraining Order and a Writ of Preliminary Injunction to enjoin the province of
Nueva Ecija from further collecting the alleged real property tax liability assessed against it.
Simply because the action is an application for injunctive relief does not necessarily mean
that it may no longer be considered as a local tax case. The subject matter and the issues,
not the name or designation of the remedy, should control. While an ancillary action for
injunction may not be a main case, the court [still has] to determine, even in a preliminary
matter, the applicable tax laws, rules and jurisprudence. x x x35

Moreover, in National Power Corporation v. Municipal Government of Navotas,36 as well as in


City of Lapu-Lapu v. Philippine Economic Zone Authority,37 this Court already held that local
tax cases include RPT.

No doubt, the injunction case before the RTC is a local tax case. And as earlier discussed, a
certiorari petition questioning an interlocutory order issued in a local tax case falls under the
jurisdiction of the CT A. Thus, the CA correctly dismissed the Petition for Certiorari before it
for lack of jurisdiction.

WHEREFORE, the Petition is DENIED. The November 2, 2010 Decision and March 24,
2011 Resolution of the Court of Appeals in CA-G.R. SP No.108441 are AFFIRMED.

SO ORDERED.
G.R. No. 210551 June 30, 2015

JOSE J. FERRER, JR., Petitioner,


vs.
CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY
TREASURER OF QUEZON CITY, and CITY ASSESSOR OF QUEZON
CITY, Respondents.

DECISION

PERALTA, J.:

Before this Court is a petition for certiorari under Rule 65 of the Rules of Court with prayer for
the issuance of a temporary restraining order (TRO) seeking to declare unconstitutional and
illegal Ordinance Nos. SP-2095, S-2011 and SP-2235, S-2013 on the Socialized Housing
Tax and Garbage Fee, respectively, which are being imposed by the respondents.

The Case

On October 17, 2011,1 respondent Quezon City Council enacted Ordinance No. SP-2095, S-
2011,2 or the Socialized Housing Tax of Quezon City, Section 3 of which provides:

SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on


the assessed value of land in excess of One Hundred Thousand Pesos (Php100,000.00)
shall be collected by the City Treasurer which shall accrue to the Socialized Housing
Programs of the Quezon City Government. The special assessment shall accrue to the
General Fund under a special account to be established for the purpose.

Effective for five (5) years, the Socialized Housing Tax ( SHT ) shall be utilized by the
Quezon City Government for the following projects: (a) land purchase/land banking; (b)
improvement of current/existing socialized housing facilities; (c) land development; (d)
construction of core houses, sanitary cores, medium-rise buildings and other similar
structures; and (e) financing of public-private partners hip agreement of the Quezon City
Government and National Housing Authority ( NHA ) with the private sector.3

Under certain conditions, a tax credit shall be enjoyed by taxpayers regularly paying the
special assessment:

SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special assessment tax as
imposed by this ordinance shall enjoy a tax credit. The tax credit may be availed of only after
five (5) years of continue[d] payment. Further, the taxpayer availing this tax credit must be a
taxpayer in good standing as certified by the City Treasurer and City Assessor.

The tax credit to be granted shall be equivalent to the total amount of the special assessment
paid by the property owner, which shall be given as follows:

1. 6th year - 20%

2. 7th year - 20%

3. 8th year - 20%


4. 9th year - 20%

5. 10th year - 20%

Furthermore, only the registered owners may avail of the tax credit and may not be
continued by the subsequent property owners even if they are buyers in good faith, heirs or
possessor of a right in whatever legal capacity over the subject property.4

On the other hand, Ordinance No. SP-2235, S-20135 was enacted on December 16, 2013
and took effect ten days after when it was approved by respondent City Mayor.6 The
proceeds collected from the garbage fees on residential properties shall be deposited solely
and exclusively in an earmarked special account under the general fund to be utilized for
garbage collections.7 Section 1 of the Ordinance se t forth the schedule and manner for the
collection of garbage fees:

SECTION 1. The City Government of Quezon City in conformity with and in relation to
Republic Act No. 7160, otherwise known as the Local Government Code of 1991 HEREBY
IMPOSES THE FOLLOWING SCHEDULE AND MANNER FOR THE ANNUAL
COLLECTION OF GARBAGE FEES, AS FOLLOWS: On all domestic households in Quezon
City;

LAND AREA IMPOSABLE FEE

Less than 200 sq. m. PHP 100.00

201 sq. m. – 500 sq. m. PHP 200.00

501 sq. m. – 1,000 sq. m. PHP 300.00

1,001 sq. m. – 1,500 sq. m. PHP 400.00

1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP 25.00

41 sq. m. – 60 sq. m. PHP 50.00

61 sq. m. – 100 sq. m. PHP 75.00

101 sq. m. – 150 sq. m. PHP 100.00

151 sq. m. – 200 sq. [m.] or more PHP 200.00

On high-rise Condominium Units


a) High-rise Condominium – The Homeowners Association of high- rise
condominiums shall pay the annual garbage fee on the total size of the entire
condominium and socialized Housing Unit and an additional garbage fee shall be
collected based on area occupied for every unit already so ld or being amortized.

b) High-rise apartment units – Owners of high-rise apartment units shall pay the
annual garbage fee on the total lot size of the entire apartment and an additional
garbage fee based on the schedule prescribed herein for every unit occupied.

The collection of the garbage fee shall accrue on the first day of January and shall be paid
simultaneously with the payment of the real property tax, but not later than the first quarter
installment.8 In case a household owner refuses to pay, a penalty of 25% of the garbage fee
due, plus an interest of 2% per month or a fraction thereof, shall be charged.9

Petitioner alleges that he is a registered co-owner of a 371-square-meter residential property


in Quezon City which is covered by Transfer Certificate of Title (TCT ) No. 216288, and that,
on January 7, 2014, he paid his realty tax which already included the garbage fee in the sum
of

Php100.00.10

The instant petition was filed on January 17, 2014. We issued a TRO on February 5, 2014,
which enjoined the enforcement of Ordinance Nos. SP-2095 and SP-2235 and required
respondents to comment on the petition without necessarily giving due course thereto.11

Respondents filed their Comment12 with urgent motion to dissolve the TRO on February 17,
2014. Thereafter, petitioner filed a Reply and a Memorandum on March 3, 2014 and
September 8, 2014, respectively.

Procedural Matters

A. Propriety of a Petition for Certiorari

Respondents are of the view that this petition for certiorari is improper since they are not
tribunals, boards or officers exercising judicial or quasi-judicial functions. Petitioner, however,
counters that in enacting Ordinance Nos. SP-2095 and SP-2235, the Quezon City Council
exercised quasi-judicial function because the ordinances ruled against the property owners
who must pay the SHT and the garbage fee, exacting from them funds for basic essential
public services that they should not be held liable. Even if a Rule 65 petition is improper,
petitioner still asserts that this Court, in a number of cases like in Rosario v. Court of
Appeals,13 has taken cognizance of an improper remedy in the interest of justice.

We agree that respondents neither acted in any judicial or quasi-judicial capacity nor
arrogated unto themselves any judicial or quasi-judicial prerogatives.

A respondent is said to be exercising judicial function where he has the power to determine
what the law is and what the legal rights of the parties are, and then undertakes to determine
these questions and adjudicate upon the rights of the parties.

Quasi-judicial function, on the other hand, is "a term which applies to the actions, discretion,
etc., of public administrative officers or bodies … required to investigate facts or ascertain
the existence of facts, hold hearings, and draw conclusions from them as a basis for their
official action and to exercise discretion of a judicial nature."

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary
that there be a law that gives rise to some specific rights of person s or property under which
adverse claims to such rights are made, and the controversy en suing therefrom is brought
before a tribunal, board, or officer clothed with power and authority to determine the law and
adjudicate the respective rights of the contending parties.14

For a writ of certiorari to issue, the following requisites must concur: (1) it must be directed
against a tribunal, board, or officer exercising judicial or quasi-judicial functions; (2) the
tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave
abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or
any plain, speedy, and adequate remedy in the ordinary course of law. The enactment by the
Quezon City Council of the assailed ordinances was done in the exercise of its legislative,
not judicial or quasi-judicial, function. Under Republic Act (R.A.) No.7160, or the Local
Government Code of 1991 (LGC), local legislative power shall be exercised by the
Sangguniang Panlungsod for the city.15Said law likewise is specific in providing that the
power to impose a tax, fee, or charge , or to generate revenue shall be exercised by the
sanggunian of the local government unit concerned through an appropriate ordinance.16

Also, although the instant petition is styled as a petition for certiorari, it essentially seeks to
declare the unconstitutionality and illegality of the questioned ordinances. It, thus, partakes of
the nature of a petition for declaratory relief, over which this Court has only appellate, not
original, jurisdiction.17

Despite these, a petition for declaratory relief may be treated as one for prohibition or
mandamus, over which we exercise original jurisdiction, in cases with far-reaching
implications or one which raises transcendental issues or questions that need to be resolved
for the public good.18The judicial policy is that this Court will entertain direct resort to it when
the redress sought cannot be obtained in the proper courts or when exceptional and
compelling circumstances warrant availment of a remedy within and calling for the exercise
of Our primary jurisdiction.19

Section 2, Rule 65 of the Rules of Court lay down under what circumstances a petition for
prohibition may be filed:

SEC. 2. Petition for prohibition. - When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are
without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and praying that judgment
be rendered commanding the respondent to desist from further proceeding in the action or
matter specified therein, or otherwise granting such incidental reliefs as law and justice may
require.

In a petition for prohibition against any tribunal, corporation, board, or person – whether
exercising judicial, quasi-judicial, or ministerial functions – who has acted without or in
excess of jurisdiction or with grave abuse of discretion, the petitioner prays that judgment be
rendered, commanding the respondents to desist from further proceeding in the action or
matter specified in the petition. In this case, petitioner's primary intention is to prevent
respondents from implementing Ordinance Nos. SP-2095 and SP-2235. Obviously, the writ
being sought is in the nature of a prohibition, commanding desistance.

We consider that respondents City Mayor, City Treasurer, and City Assessor are performing
ministerial functions. A ministerial function is one that an officer or tribunal performs in the
context of a given set of facts, in a prescribed manner and without regard for the exercise of
his or its own judgment, upon the propriety or impropriety of the act done.20 Respondent
Mayor, as chief executive of the city government, exercises such powers and performs such
duties and functions as provided for by the LGC and other laws.21 Particularly, he has the
duty to ensure that all taxes and other revenues of the city are collected, and that city funds
are applied to the payment of expenses and settlement of obligations of the city, in
accordance with law or ordinance.22 On the other hand, under the LGC, all local taxes, fees,
and charges shall be collected by the provincial, city, municipal, or barangay treasurer, or
their duly-authorized deputies, while the assessor shall take charge, among others, of
ensuring that all laws and policies governing the appraisal and assessment of real properties
for taxation purposes are properly executed.23 Anent the SHT, the Department of Finance
(DOF) Local Finance Circular No. 1-97, dated April 16, 1997, is more specific:

6.3 The Assessor’s office of the Identified LGU shall:

a. immediately undertake an inventory of lands within its jurisdiction


which shall be subject to the levy of the Social Housing Tax (SHT) by
the local sanggunian concerned;

b. inform the affected registered owners of the effectivity of the SHT;


a list of the lands and registered owners shall also be posted in 3
conspicuous places in the city/municipality;

c. furnish the Treasurer’s office and the local sanggunian concerned


of the list of lands affected;

6.4 The Treasurer’s office shall:

a. collect the Social Housing Tax on top of the Real Property Tax,
SEF Tax and other special assessments;

b. report to the DOF, thru the Bureau of Local Government Finance,


and the Mayor’s office the monthly collections on Social Housing Tax
(SHT). An annual report should likewise be submitted to the HUDCC
on the total revenues raised during the year pursuant to Sec. 43, R.A.
7279 and the manner in which the same was disbursed.

Petitioner has adduced special and important reasons as to why direct recourse to us should
be allowed. Aside from presenting a novel question of law, this case calls for immediate
resolution since the challenged ordinances adversely affect the property interests of all
paying constituents of Quezon City. As well, this petition serves as a test case for the
guidance of other local government units (LGUs).Indeed, the petition at bar is of
transcendental importance warranting a relaxation of the doctrine of hierarchy of courts. In
Social Justice Society (SJS) Officers, et al. v. Lim ,24the Court cited the case of Senator
Jaworski v. Phil. Amusement & Gaming Corp.,25 where We ratiocinated:
Granting arguendo that the present action cannot be properly treated as a petition for
prohibition, the transcendental importance of the issues involved in this case warrants that
we set aside the technical defects and take primary jurisdiction over the petition at bar . x x x
This is in accordance with the well entrenched principle that rules of procedure are not
inflexible tools designed to hinder or delay, but to facilitate and promote the administration of
justice. Their strict and rigid application, which would result in technicalities that tend to
frustrate, rather than promote substantial justice, must always be eschewed.26

B. Locus Standi of Petitioner

Respondents challenge petitioner’s legal standing to file this case on the ground that, in
relation to Section 3 of Ordinance No. SP-2095, petitioner failed to allege his ownership of a
property that has an assessed value of more than Php100,000.00 and, with respect to
Ordinance No. SP-2335, by what standing or personality he filed the case to nullify the same.
According to respondents, the petition is not a class suit, and that, for not having specifically
alleged that petitioner filed the case as a taxpayer, it could only be surmised whether he is a
party-in-interest who stands to be directly benefited or injured by the judgment in this case.

It is a general rule that every action must be prosecuted or defended in the name of the real
party-in-interest, who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.

Jurisprudence defines interest as "material interest, an interest in issue and to be affected by


the decree, as distinguished from mere interest in the question involved, or a mere incidental
interest. By real interest is meant a present substantial interest, as distinguished from a mere
expectancy or a future, contingent, subordinate, or consequential interest." "To qualify a
person to be a real party-in-interest in whose name an action must be prosecuted, he must
appear to be the present real owner of the right sought to be enforced."27

"Legal standing" or locus standi calls for more than just a generalized grievance.28 The
concept has been define d as a personal and substantial interest in the case such that the
party has sustained or will sustain direct injury as a result of the government al act that is
being challenged.29 The gist of the question of standing is whether a party alleges such
personal stake in the outcome of the controversy as to assure that concrete adverseness
which sharpens the presentation of issues upon which the court depends for illumination of
difficult constitutional questions.30

A party challenging the constitutionality of a law, act, or statute must show "not only that the
law is invalid, but also that he has sustained or is in immediate, or imminent danger of
sustaining some direct injury as a result of its enforcement, and not merely that he suffers
thereby in some indefinite way." It must be shown that he has been, or is about to be, denied
some right or privilege to which he is lawfully entitled, or that he is about to be subjected to
some burdens or penalties by reason of the statute complained of.31

Tested by the foregoing, petitioner in this case clearly has legal standing to file the petition.
He is a real party-in-interest to assail the constitutionality and legality of Ordinance Nos. SP-
2095 and SP-2235 because respondents did not dispute that he is a registered co-owner of
a residential property in Quezon City an d that he paid property tax which already included
the SHT and the garbage fee. He has substantial right to seek a refund of the payments he
made and to stop future imposition. While he is a lone petitioner, his cause of action to
declare the validity of the subject ordinances is substantial and of paramount interest to
similarly situated property owners in Quezon City.
C. Litis Pendentia

Respondents move for the dismissal of this petition on the ground of litis pendentia. They
claim that, as early as February 22, 2012, a case entitled Alliance of Quezon City
Homeowners, Inc., et al., v. Hon. Herbert Bautista, et al. , docketed as Civil Case No. Q-12-
7-820, has been pending in the Quezon City Regional Trial Court, Branch 104, which assails
the legality of Ordinance No. SP-2095. Relying on City of Makati, et al. v. Municipality (now
City) of Taguig, et al.,32 respondents assert that there is substantial identity of parties
between the two cases because petitioner herein and plaintiffs in the civil case filed their
respective cases as taxpayers of Quezon City.

For petitioner, however, respondents’ contention is untenable since he is not a party in


Alliance and does not even have the remotest identity or association with the plaintiffs in said
civil case. Moreover, respondents’ arguments would deprive this Court of its jurisdiction to
determine the constitutionality of laws under Section 5, Article VIII of the 1987 Constitution.33

Litis pendentia is a Latin term which literally means "a pending suit" and is variously referred
to in some decisions as lis pendens and auter action pendant.34 While it is normally
connected with the control which the court has on a property involved in a suit during the
continuance proceedings, it is more interposed as a ground for the dismissal of a civil action
pending in court.35 In Film Development Council of the Philippines v. SM Prime Holdings,
Inc.,36 We elucidated:

Litis pendentia, as a ground for the dismissal of a civil action, refers to a situation where two
actions are pending between the same parties for the same cause of action, so that one of
them becomes unnecessary and vexatious. It is based on the policy against multiplicity of
suit and authorizes a court to dismiss a case motu proprio.

xxxx

The requisites in order that an action may be dismissed on the ground of litis pendentia are:
(a) the identity of parties, or at least such as representing the same interest in both actions;
(b) the identity of rights asserted and relief prayed for, the relief being founded on the same
facts, and (c) the identity of the two cases such that judgment in one, regardless of which
party is successful, would amount to res judicata in the other.

The underlying principle of litis pendentia is the theory that a party is not allowed to vex
another more than once regarding the same subject matter and for the same cause of action.
This theory is founded on the public policy that the same subject matter should not be the
subject of controversy in courts more than once, in order that possible conflicting judgments
may be avoided for the sake of the stability of the rights and status of persons, and also to
avoid the costs and expenses incident to numerous suits.

Among the several tests resorted to in ascertaining whether two suits relate to a single or
common cause of action are: (1) whether the same evidence would support and sustain both
the first and second causes of action; and (2) whether the defenses in one case may be
used to substantiate the complaint in the other.

The determination of whether there is an identity of causes of action for purposes of litis
pendentia is inextricably linked with that of res judicata , each constituting an element of the
other. In either case, both relate to the sound practice of including, in a single litigation, the
disposition of all issues relating to a cause of action that is before a court.37
There is substantial identity of the parties when there is a community of interest between a
party in the first case and a party in the second case albeit the latter was not impleaded in
the first case.38Moreover, the fact that the positions of the parties are reversed, i.e., the
plaintiffs in the first case are the defendants in the second case or vice-versa, does not
negate the identity of parties for purposes of determining whether the case is dismissible on
the ground of litis pendentia .39

In this case, it is notable that respondents failed to attach any pleading connected with the
alleged civil case pending before the Quezon City trial court. Granting that there is
1âwphi1

substantial identity of parties between said case and this petition, dismissal on the ground of
litis pendentia still cannot be had in view of the absence of the second and third requisites.
There is no way for us to determine whether both cases are based on the same set of facts
that require the presentation of the same evidence. Even if founded on the same set of facts,
the rights asserted and reliefs prayed for could be different. Moreover, there is no basis to
rule that the two cases are intimately related and/or intertwined with one another such that
the judgment that may be rendered in one, regardless of which party would be successful,
would amount to res judicata in the other.

D. Failure to Exhaust Administrative Remedies

Respondents contend that petitioner failed to exhaust administrative remedies for his non-
compliance with Section 187 of the LGC, which mandates:

Section 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue
Measures; Mandatory Public Hearings. – The procedure for approval of local tax ordinances
and revenue measures shall be in accordance with the provisions of this Code: Provided,
That public hearings shall be conducted for the purpose prior to the enactment thereof:
Provided, further, That any question on the constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof
to the Secretary of Justice who shall render a decision within sixty (60) days from the date of
receipt of the appeal: Provided, however, That such appeal shall not have the effect of
suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or
charge levied therein: Provided, finally, That within thirty (30) days after receipt of the
decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the
appeal, the aggrieved party may file appropriate proceedings with a court of competent
jurisdiction.

The provision, the constitutionality of which was sustained in Drilon v. Lim ,40 has been
construed as mandatory41 considering that –

A municipal tax ordinance empowers a local government unit to impose taxes. The power to
tax is the most effective instrument to raise needed revenues to finance and support the
myriad activities of local government units for the delivery of basic services essential to the
promotion of the general welfare and enhancement of peace, progress, and prosperity of the
people. Consequently, any delay in implementing tax measures would be to the detriment of
the public. It is for this reason that protests over tax ordinances are required to be done
within certain time frames. x x x.42

The obligatory nature of Section 187 was underscored in Hagonoy Market Vendor Asso. v.
Municipality of Hagonoy:43
x x x [T]he timeframe fixed by law fo r parties to avail of their legal remedies before
competent courts is not a "mere technicality" that can be easily brushed aside. The periods
stated in Section 187 of the Local Government Code are mandatory. x x x Being its lifeblood,
collection of revenues by the government is of paramount importance. The funds for the
operation of its agencies and provision of basic services to its inhabitants are largely derived
from its revenues and collections. Thus, it is essential that the validity of revenue measures
is not left uncertain for a considerable length of time. Hence, the law provided a time limit for
an aggrieved party to assail the legality of revenue measures and tax ordinances."44

Despite these cases, the Court, in Ongsuco, et al. v. Hon. Malones,45held that there was no
need for petitioners therein to exhaust administrative remedies before resorting to the courts,
considering that there was only a pure question of law, the parties did not dispute any factual
matter on which they had to present evidence. Likewise, in Cagayan Electric Power and
Light Co., Inc. v. City of Cagayan de Oro,46 We relaxed the application of the rules in view of
the more substantive matters. For the same reasons, this petition is an exception to the
general rule.

Substantive Issues

Petitioner asserts that the protection of real properties from informal settlers and the
collection of garbage are basic and essential duties and functions of the Quezon City
Government. By imposing the SHT and the garbage fee, the latter has shown a penchant
and pattern to collect taxes to pay for public services that could be covered by its revenues
from taxes imposed on property, idle land, business, transfer, amusement, etc., as well as
the Internal Revenue Allotment (IRA ) from the National Government. For petitioner, it is
noteworthy that respondents did not raise the issue that the Quezon City Government is in
dire financial state and desperately needs money to fund housing for informal settlers and to
pay for garbage collection. In fact, it has not denied that its revenue collection in 2012 is in
the sum of ₱13.69 billion.

Moreover, the imposition of the SHT and the garbage fee cannot be justified by the Quezon
City Government as an exercise of its power to create sources of income under Section 5,
Article X of the 1987 Constitution.47 According to petitioner, the constitutional provision is not
a carte blanche for the LGU to tax everything under its territorial and political jurisdiction as
the provision itself admits of guidelines and limitations.

Petitioner further claims that the annual property tax is an ad valorem tax, a percentage of
the assessed value of the property, which is subject to revision every three (3) years in order
to reflect an increase in the market value of the property. The SHT and the garbage fee are
actually increases in the property tax which are not based on the assessed value of the
property or its reassessment every three years; hence, in violation of Sections 232 and 233
of the LGC.48

For their part, respondents relied on the presumption in favor of the constitutionality of
Ordinance Nos. SP-2095 and SP-2235, invoking Victorias Milling Co., Inc. v. Municipality of
Victorias, etc.,49 People v. Siton, et al.,50 and Hon. Ermita v. Hon. Aldecoa-Delorino .51 They
argue that the burden of establishing the invalidity of an ordinance rests heavily upon the
party challenging its constitutionality. They insist that the questioned ordinances are proper
exercises of police power similar to Telecom. & Broadcast Attys. of the Phils., Inc. v.
COMELEC52 and Social Justice Society (SJS), et al. v. Hon. Atienza, Jr.53 and that their
enactment finds basis in the social justice principle enshrined in Section 9,54 Article II of the
1987 Constitution.
As to the issue of publication, respondents argue that where the law provides for its own
effectivity, publication in the Official Gazette is not necessary so long as it is not punitive in
character, citing Balbuna, et al. v. Hon. Secretary of Education, et al.55 and Askay v. Cosalan
.[56]] Thus, Ordinance No. SP-2095 took effect after its publication, while Ordinance No. SP-
2235 became effective after its approval on December 26, 2013.

Additionally, the parties articulate the following positions:

On the Socialized Housing Tax

Respondents emphasize that the SHT is pursuant to the social justice principle found in
Sections 1 and 2, Article XIII57 of the 1987 Constitution and Sections 2 (a)58 and 4359 of R.A.
No. 7279, or the "Urban Development and Housing Act of 1992 ( UDHA ).

Relying on Manila Race Horse Trainers Assn., Inc. v. De La Fuente,60and Victorias Milling
Co., Inc. v. Municipality of Victorias, etc.,61respondents assert that Ordinance No. SP-2095
applies equally to all real property owners without discrimination. There is no way that the
ordinance could violate the equal protection clause because real property owners and
informal settlers do not belong to the same class.

Ordinance No. SP-2095 is also not oppressive since the tax rate being imposed is consistent
with the UDHA. While the law authorizes LGUs to collect SHT on properties with an
assessed value of more than ₱50,000.00, the questioned ordinance only covers properties
with an assessed value exceeding ₱100,000.00. As well, the ordinance provides for a tax
credit equivalent to the total amount of the special assessment paid by the property owner
beginning in the sixth (6th) year of the effectivity of the ordinance.

On the contrary, petitioner claims that the collection of the SHT is tantamount to a penalty
imposed on real property owners due to the failure of respondent Quezon City Mayor and
Council to perform their duty to secure and protect real property owners from informal
settlers, thereby burdening them with the expenses to provide funds for housing. For
petitioner, the SHT cannot be viewed as a "charity" from real property owners since it is
forced, not voluntary.

Also, petitioner argues that the collection of the SHT is a kind of class legislation that violates
the right of property owners to equal protection of the laws since it favors informal settlers
who occupy property not their own and pay no taxes over law-abiding real property owners w
ho pay income and realty taxes.

Petitioner further contends that respondents’ characterization of the SHT as "nothing more
than an advance payment on the real property tax" has no statutory basis. Allegedly,
property tax cannot be collected before it is due because, under the LGC, chartered cities
are authorized to impose property tax based on the assessed value and the general revision
of assessment that is made every three (3) years.

As to the rationale of SHT stated in Ordinance No. SP-2095, which, in turn, was based on
Section 43 of the UDHA, petitioner asserts that there is no specific provision in the 1987
Constitution stating that the ownership and enjoyment of property bear a social function. And
even if there is, it is seriously doubtful and far-fetched that the principle means that property
owners should provide funds for the housing of informal settlers and for home site
development. Social justice and police power, petitioner believes, does not mean imposing a
tax on one, or that one has to give up something, for the benefit of another. At best, the
principle that property ownership and enjoyment bear a social function is but a reiteration of
the Civil Law principle that property should not be enjoyed and abused to the injury of other
properties and the community, and that the use of the property may be restricted by police
power, the exercise of which is not involved in this case.

Finally, petitioner alleges that 6 Bistekvilles will be constructed out of the SHT collected.
Bistek is the monicker of respondent City Mayor. The Bistekvilles makes it clear, therefore,
that politicians will take the credit for the tax imposed on real property owners.

On the Garbage Fee

Respondents claim that Ordinance No. S-2235, which is an exercise of police power, collects
on the average from every household a garbage fee in the meager amount of thirty-three
(33) centavos per day compared with the sum of ₱1,659.83 that the Quezon City
Government annually spends for every household for garbage collection and waste
management.62

In addition, there is no double taxation because the ordinance involves a fee. Even assuming
that the garbage fee is a tax, the same cannot be a direct duplicate tax as it is imposed on a
different subject matter and is of a different kind or character. Based on Villanueva, et al. v.
City of Iloilo63 and Victorias Milling Co., Inc. v. Municipality of Victorias, etc.,64 there is no
"taxing twice" because the real property tax is imposed on ownership based on its assessed
value, while the garbage fee is required on the domestic household. The only reference to
the property is the determination of the applicable rate and the facility of collection.

Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as an exercise of
police power. The cases of Calalang v. Williams,65 Patalinghug v. Court of Appeals,66 and
Social Justice Society (SJS), et al. v. Hon. Atienza, Jr.,67 which were cited by respondents,
are inapplicable since the assailed ordinance is a revenue measure and does not regulate
the disposal or other aspect of garbage.

The subject ordinance, for petitioner, is discriminatory as it collects garbage fee only from
domestic households and not from restaurants, food courts, fast food chains, and other
commercial dining places that spew garbage much more than residential property owners.

Petitioner likewise contends that the imposition of garbage fee is tantamount to double
taxation because garbage collection is a basic and essential public service that should be
paid out from property tax, business tax, transfer tax, amusement tax, community tax
certificate, other taxes, and the IRA of the Quezon City Government. To bolster the claim, he
states that the revenue collection of the Quezon City Government reached Php13.69 billion
in 2012. A small portion of said amount could be spent for garbage collection and other
essential services.

It is further noted that the Quezon City Government already collects garbage fee under
Section 4768 of R.A. No. 9003, or the Ecological Solid Waste Management Act of 2000, which
authorizes LGUs to impose fees in amounts sufficient to pay the costs of preparing,
adopting, and implementing a solid waste management plan, and that LGUs have access to
the Solid Waste Management (SWM) Fund created under Section 4669 of the same law. Also,
according to petitioner, it is evident that Ordinance No. S2235 is inconsistent with R.A. No.
9003 for whil e the law encourages segregation, composting, and recycling of waste, the
ordinance only emphasizes the collection and payment of garbage fee; while the law calls for
an active involvement of the barangay in the collection, segregation, and recycling of
garbage, the ordinance skips such mandate. Lastly, in challenging the ordinance, petitioner
avers that the garbage fee was collected even if the required publication of its approval had
not yet elapsed. He notes that on January 7, 2014, he paid his realty tax which already
included the garbage fee.

The Court's Ruling

Respondents correctly argued that an ordinance, as in every law, is presumed valid.

An ordinance carries with it the presumption of validity. The question of reasonableness


though is open to judicial inquiry. Much should be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an ordinance as unreasonable unless the
amount is so excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or
confiscatory. A rule which has gained acceptance is that factors relevant to such an inquiry
are the municipal conditions as a whole and the nature of the business made subject to
imposition.70

For an ordinance to be valid though, it must not only be within the corporate powers of the
LGU to enact and must be passed according to the procedure prescribed by law, it should
also conform to the following requirements: (1) not contrary to the Constitution or any statute;
(2) not unfair or oppressive; (3) not partial or discriminatory; (4) not prohibit but may regulate
trade; (5) general and consistent with public policy; and (6) not unreasonable.71 As
jurisprudence indicates, the tests are divided into the formal (i.e., whether the ordinance was
enacted within the corporate powers of the LGU and whether it was passed in accordance
with the procedure prescribed by law), and the substantive ( i.e., involving inherent merit, like
the conformity of the ordinance with the limitations under the Constitution and the statutes,
as well as with the requirements of fairness and reason, and its consistency with public
policy).72

An ordinance must pass muster under the test of constitutionality and the test of consistency
with the prevailing laws.73 If not, it is void.74

Ordinance should uphold the principle of the supremacy of the Constitution.75 As to


conformity with existing statutes,

Batangas CATV, Inc. v. Court of Appeals76 has this to say:

It is a fundamental principle that municipal ordinances are inferior in status and subordinate
to the laws of the state. An ordinance in conflict with a state law of general character and
statewide application is universally held to be invalid. The principle is frequently expressed in
the declaration that municipal authorities, under a general grant of power, cannot adopt
ordinances which infringe the spirit of a state law or repugnant to the general policy of the
state. In every power to pass ordinances given to a municipality, there is an implied
restriction that the ordinances shall be consistent with the general law. In the language of
Justice Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties Corp., Inc., ruled that:

The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local councils
exercise only delegated legislative powers conferred on them by Congress as the national
lawmaking body. The delegate cannot be superior to the principal or exercise powers higher
than those of the latter. It is a heresy to suggest that the local government units can undo the
acts of Congress, from which they have derived their power in the first place, and negate by
mere ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights wholly from the
legislature. It breathes into them the breath of life, without which they cannot exist. As it
creates, so it may destroy. As it may destroy, it may abridge and control. Unless there is
some constitutional limitation on the right, the legislature might, by a single act, and if we can
suppose it capable of so great a folly and so great a wrong, sweep from existence all of the
municipal corporations in the State, and the corporation could not prevent it. We know of no
limitation on the right so far as to the corporation themselves are concerned. They are so to
phrase it, the mere tenants at will of the legislature.

This basic relationship between the national legislature and the local government units has
not been enfeebled by the new provisions in the Constitution strengthening the policy of local
autonomy. Without meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly reduced degree now
than under our previous Constitutions. The power to create still includes the power to
destroy. The power to grant still includes the power to withhold or recall. True, there are
certain notable innovations in the Constitution, like the direct conferment on the local
government units of the power to tax, which cannot now be withdrawn by mere statute. By
and large, however, the national legislature is still the principal of the local government units,
which cannot defy its will or modify or violate it.77

LGUs must be reminded that they merely form part of the whole; that the policy of ensuring
the autonomy of local governments was never intended by the drafters of the 1987
Constitution to create an imperium in imperio and install an intra-sovereign political
subdivision independent of a single sovereign state.78

"[M]unicipal corporations are bodies politic and corporate, created not only as local units of
local self-government, but as governmental agencies of the state. The legislature, by
establishing a municipal corporation, does not divest the State of any of its sovereignty;
absolve itself from its right and duty to administer the public affairs of the entire state; or
divest itself of any power over the inhabitants of the district which it possesses before the
charter was granted."79

LGUs are able to legislate only by virtue of a valid delegation of legislative power from the
national legislature; they are mere agents vested with what is called the power of
subordinate legislation.80 "Congress enacted the LGC as the implementing law for the
delegation to the various LGUs of the State’s great powers, namely: the police power, the
power of eminent domain, and the power of taxation. The LGC was fashioned to delineate
the specific parameters and limitations to be complied with by each LGU in the exercise of
these delegated powers with the view of making each LGU a fully functioning subdivision of
the State subject to the constitutional and statutory limitations."81

Specifically, with regard to the power of taxation, it is indubitably the most effective
instrument to raise needed revenues in financing and supporting myriad activities of the
LGUs for the delivery of basic services essential to the promotion of the general welfare and
the enhancement of peace, progress, and prosperity of the people.82 As this Court opined in
National Power Corp. v. City of Cabanatuan:83

In recent years, the increasing social challenges of the times expanded the scope of state
activity, and taxation has become a tool to realize social justice and the equitable distribution
of wealth, economic progress and the protection of local industries as well as public welfare
and similar objectives. Taxation assume s even greater significance with the ratification of
the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on
Congress; local legislative bodies are now given direct authority to levy taxes, fees and other
charges pursuant to Article X, Section 5 of the 1987 Constitution, viz: "Section 5. Each Local
Government unit shall have the power to create its own sources of revenue, to levy taxes,
fees and charges subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local governments."

This paradigm shift results from the realization that genuine development can be achieved
only by strengthening local autonomy and promoting decentralization of governance. For a
long time, the country’s highly centralized government structure has bred a culture of
dependence among local government leaders upon the national leadership. It has also
"dampened the spirit of initiative, innovation and imaginative resilience in matters of local
development on the part of local government leaders." The only way to shatter this culture of
dependence is to give the LGUs a wider role in the delivery of basic services, and confer
them sufficient powers to generate their own sources for the purpose. To achieve this goal,
Section 3 of Article X of the 1987 Constitution mandates Congress to enact a local
government code that will, consistent with the basic policy of local autonomy , set the
guidelines and limitations to this grant of taxing powers x x x84

Fairly recently, We also stated in Pelizloy Realty Corporation v. Province of Benguet85 that:

The rule governing the taxing power of provinces, cities, municipalities and barangays is
summarized in Icard v. City Council of Baguio :

It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent
power of taxation. The charter or statute must plainly show an intent to confer that power or
the municipality, cannot assume it. And the power when granted is to be construed in
strictissimi juris . Any doubt or ambiguity arising out of the term used in granting that power
must be resolved against the municipality. Inferences, implications, deductions – all these –
have no place in the interpretation of the taxing power of a municipal corporation.
[Underscoring supplied]

xxxx

Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested
exclusively on Congress; local legislative bodies are now given direct authority to levy taxes,
fees and other charges." Nevertheless, such authority is "subject to such guidelines and
limitations as the Congress may provide."

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic
Act No. 7160, otherwise known as the Local Government Code of 1991. Book II of the LGC
governs local taxation and fiscal matters.86

Indeed, LGUs have no inherent power to tax except to the extent that such power might be
delegated to them either by the basic law or by the statute.87 "Under the now prevailing
Constitution , where there is neither a grant nor a prohibition by statute , the tax power must
be deemed to exist although Congress may provide statutory limitations and guidelines. The
basic rationale for the current rule is to safeguard the viability and self-sufficiency of local
government units by directly granting them general and broad tax powers. Nevertheless, the
fundamental law did not intend the delegation to be absolute and unconditional; the
constitutional objective obviously is to ensure that, while the local government units are being
strengthened and made more autonomous , the legislature must still see to it that (a) the
taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions;
(b) each local government unit will have its fair share of available resources; (c) the
resources of the national government will not be unduly disturbed; and (d) local taxation will
be fair, uniform, and just."88

Subject to the provisions of the LGC and consistent with the basic policy of local autonomy,
every LGU is now empowered and authorized to create its own sources of revenue and to
levy taxes, fees, and charges which shall accrue exclusively to the local government unit as
well as to apply its resources and assets for productive, developmental, or welfare purposes,
in the exercise or furtherance of their governmental or proprietary powers and
functions.89 The relevant provisions of the LGC which establish the parameters of the taxing
power of the LGUs are as follows:

SECTION 130. Fundamental Principles. – The following fundamental principles shall govern
th e exercise of the taxing and other revenue-raising powers of local government units:

(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:

(1) be equitable and based as far as practicable on the taxpayer’s ability to


pay;

(2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;

(4) not be contrary to law, public policy, national economic policy, or in


restraint of trade;

(c) The collection of local taxes, fees, charges and other impositions shall in no case
be left to any private person;

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to
the benefit of, and be subject to the disposition by, the local government unit levying
the tax, fee, charge or other imposition unless otherwise specifically provided herein;
and,

(e) Each local government unit shall, as far as practicable, evolve a progressive
system of taxation.

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. –
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:

(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;


(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided herein;

(d) Customs duties, registration fees of vessel and wharage on wharves, tonnage
dues, and all other kinds of customs fees, charges and dues except wharfage on
wharves constructed and maintained by the local government unit concerned;

(e) Taxes, fees, and charges and other impositions upon goods carried into or out of,
or passing through, the territorial jurisdictions of local government units in the guise
of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees, or
charges in any form whatsoever upon such goods or merchandise;

(f) Taxes, fees or charges on agricultural and aquatic products when sold by
marginal farmers or fishermen;

(g) Taxes on business enterprises certified to by the Board of Investments as pioneer


or non-pioneer for a period of six (6) and four (4) years, respectively from the date of
registration;

(h) Excise taxes on articles enumerated under the National Internal Revenue Code,
as amended, and taxes, fees or charges on petroleum products;

(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar


transactions on goods or services except as otherwise provided herein;

(j) Taxes on the gross receipts of transportation contractors and persons engaged in
the transportation of passengers or freight by hire and common carriers by air, land
or water, except as provided in this Code;

(k) Taxes on premiums paid by way of reinsurance or retrocession;

(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance
of all kinds of licenses or permits for the driving thereof, except tricycles;

(m) Taxes, fees, or other charges on Philippine products actually exported, except as
otherwise provided herein;

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and
cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-
nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code
of the Philippines" respectively; and

(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.

SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in this Code, the
city, may levy the taxes, fees, and charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied and collected by highly
urbanized and independent component cities shall accrue to them and distributed in
accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the
province or municipality by not more than fifty percent (50%) except the rates of professional
and amusement taxes.

SECTION 186. Power to Levy Other Taxes, Fees or Charges. – Local government units may
exercise the power to levy taxes, fees or charges on any base or subject not otherwise
specifically enumerated herein or taxed under the provisions of the National Internal
Revenue Code, as amended, or other applicable laws: Provided, That the taxes, fees, or
charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such taxes, fees or charges
shall not be enacted without any prior public hearing conducted for the purpose.

On the Socialized Housing Tax

Contrary to petitioner’s submission, the 1987 Constitution explicitly espouses the view that
the use of property bears a social function and that all economic agents shall contribute to
the common good.90 The Court already recognized this in Social Justice Society (SJS), et al.
v. Hon. Atienza, Jr.:91

Property has not only an individual function, insofar as it has to provide for the needs of the
owner, but also a social function insofar as it has to provide for the needs of the other
members of society. The principle is this:

Police power proceeds from the principle that every holder of property, however absolute
and unqualified may be his title, holds it under the implied liability that his use of it shall not
be injurious to the equal enjoyment of others having an equal right to the enjoyment of their
property, no r injurious to the right of the community. Rights of property, like all other social
and conventional rights, are subject to reasonable limitations in their enjoyment as shall
prevent them from being injurious, and to such reasonable restraints and regulations
established by law as the legislature, under the governing an d controlling power vested in
them by the constitution, may think necessary and expedient.92

Police power, which flows from the recognition that salus populi est suprema lex (the welfare
of the people is the supreme law), is the plenary power vested in the legislature to make
statutes and ordinances to promote the health, morals, peace, education, good order or
safety and general welfare of the people.93 Property rights of individuals may be subjected to
restraints and burdens in order to fulfill the objectives of the government in the exercise of
police power. 94 In this jurisdiction, it is well-entrenched that taxation may be made the
implement of the state’s police power.95

Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to 0.5% on the
assessed value of land in excess of Php100,000.00. This special assessment is the same
tax referred to in R.A. No. 7279 or the UDHA.96 The SHT is one of the sources of funds for
urban development and housing program.97 Section 43 of the law provides:

Sec. 43. Socialized Housing Tax . – Consistent with the constitutional principle that the
ownership and enjoyment of property bear a social function and to raise funds for the
Program, all local government units are hereby authorized to impose an additional one-half
percent (0.5%) tax on the assessed value of all lands in urban areas in excess of Fifty
thousand pesos (₱50,000.00).

The rationale of the SHT is found in the preambular clauses of the subject ordinance, to wit:
WHEREAS, the imposition of additional tax is intended to provide the City Government with
sufficient funds to initiate, implement and undertake Socialized Housing Projects and other
related preliminary activities;

WHEREAS, the imposition of 0.5% tax will benefit the Socialized Housing Programs and
Projects of the City Government, specifically the marginalized sector through the acquisition
of properties for human settlements;

WHEREAS, the removal of the urban blight will definitely increase fair market value of
properties in the city[.]

The above-quoted are consistent with the UDHA, which the LGUs are charged to implement
in their respective localities in coordination with the Housing and Urban Development
Coordinating Council, the national housing agencies, the Presidential Commission for the
Urban Poor, the private sector, and other non-government organizations.98 It is the declared
policy of the State to undertake a comprehensive and continuing urban development and
housing program that shall, among others, uplift the conditions of the underprivileged and
homeless citizens in urban areas and in resettlement areas, and provide for the rational use
and development of urban land in order to bring a bout, among others, reduction in urban
dysfunctions, particularly those that adversely affect public health, safety and ecology, and
access to land and housing by the underprivileged and homeless citizens.99 Urban renewal
and resettlement shall include the rehabilitation and development of blighted and slum
areas100 and the resettlement of program beneficiaries in accordance with the provisions of
the UDHA.101 Under the UDHA, socialized housing102 shall be the primary strategy in providing
shelter for the underprivileged and homeless.103 The LGU or the NHA, in cooperation with the
private developers and concerned agencies, shall provide socialized housing or re
settlement areas with basic services and facilities such as potable water, power and
electricity, and an adequate power distribution system, sewerage facilities, and an efficient
and adequate solid waste disposal system; and access to primary roads and transportation
facilities.104 The provisions for health, education, communications, security, recreation, relief
and welfare shall also be planned and be given priority for implementation by the LGU and
concerned agencies in cooperation with the private sector and the beneficiaries
themselves.105

Moreover, within two years from the effectivity of the UDHA, the LGUs, in coordination with
the NHA, are directed to implement the relocation and resettlement of persons living in
danger areas such as esteros , railroad tracks, garbage dumps, riverbanks, shorelines,
waterways, and other public places like sidewalks, roads, parks, and playgrounds.106 In
coordination with the NHA, the LG Us shall provide relocation or resettlement sites with basic
services and facilities and access to employment and livelihood opportunities sufficient to
meet the basic needs of the affected families.107

Clearly, the SHT charged by the Quezon City Government is a tax which is within its power
to impose. Aside from the specific authority vested by Section 43 of the UDHA, cities are
allowed to exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and effective provision
of the basic services and facilities which include, among others, programs and projects for
low-cost housing and other mass dwellings.108 The collections made accrue to its socialized
housing programs and projects.

The tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a
regulatory purpose. The levy is primarily in the exercise of the police power for the general
welfare of the entire city. It is greatly imbued with public interest. Removing slum areas in
Quezon City is not only beneficial to the underprivileged and homeless constituents but
advantageous to the real property owners as well. The situation will improve the value of the
their property investments, fully enjoying the same in view of an orderly, secure, and safe
community, and will enhance the quality of life of the poor, making them law-abiding
constituents and better consumers of business products.

Though broad and far-reaching, police power is subordinate to constitutional limitations and
is subject to the requirement that its exercise must be reasonable and for the public
good.109 In the words of City of Manila v. Hon. Laguio, Jr.:110

The police power granted to local government units must always be exercised with utmost
observance of the rights of the people to due process and equal protection of the law. Such
power cannot be exercised whimsically, arbitrarily or despotically as its exercise is subject to
a qualification, limitation or restriction demanded by the respect and regard due to the
prescription of the fundamental law, particularly those forming part of the Bill of Rights.
Individual rights, it bears emphasis, may be adversely affected only to the extent that may
fairly be required by the legitimate demands of public interest or public welfare. Due process
requires the intrinsic validity of the law in interfering with the rights of the person to his life,
liberty and property.

xxxx

To successfully invoke the exercise of police power as the rationale for the enactment of the
Ordinance, and to free it from the imputation of constitutional infirmity, not only must it
appear that the interests of the public generally, as distinguished from those of a particular
class, require an interference with private rights, but the means adopted must be reasonably
necessary for the accomplishment of the purpose and not unduly oppressive upon
individuals. It must be evident that no other alternative for the accomplishment of the
purpose less intrusive of private rights can work. A reasonable relation must exist between
the purposes of the police measure and the means employed for its accomplishment, for
even under the guise of protecting the public interest, personal rights and those pertaining to
private property will not be permitted to be arbitrarily invaded.

Lacking a concurrence of these two requisites, the police measure shall be struck down as
an arbitrary intrusion into private rights – a violation of the due process clause.111

As with the State, LGUs may be considered as having properly exercised their police power
only if there is a lawful subject and a lawful method or, to be precise, if the following
requisites are met: (1) the interests of the public generally, as distinguished from those of a
particular class, require its exercise and (2) the mean s employed are reasonably necessary
for the accomplishment of the purpose and not unduly oppressive upon individuals.112

In this case, petitioner argues that the SHT is a penalty imposed on real property owners
because it burdens them with expenses to provide funds for the housing of informal settlers,
and that it is a class legislation since it favors the latter who occupy properties which is not
their own and pay no taxes.

We disagree.

Equal protection requires that all persons or things similarly situated should be treated alike,
both as to rights conferred and responsibilities imposed.113 The guarantee means that no
person or class of persons shall be denied the same protection of laws which is enjoyed by
other persons or other classes in like circumstances.114 Similar subjects should not be treated
differently so as to give undue favor to some and unjustly discriminate against others.115 The
law may, therefore, treat and regulate one class differently from another class provided there
are real and substantial differences to distinguish one class from another.116

An ordinance based on reasonable classification does not violate the constitutional guaranty
of the equal protection of the law. The requirements for a valid and reasonable classification
are: (1) it must rest on substantial distinctions; (2) it must be germane to the purpose of the
law; (3) it must not be limited to existing conditions only; and (4) it must apply equally to all
members of the same class.117For the purpose of undertaking a comprehensive and
continuing urban development and housing program, the disparities between a real property
owner and an informal settler as two distinct classes are too obvious and need not be
discussed at length. The differentiation conforms to the practical dictates of justice and equity
and is not discriminatory within the meaning of the Constitution. Notably, the public purpose
of a tax may legally exist even if the motive which impelled the legislature to impose the tax
was to favor one over another.118 It is inherent in the power to tax that a State is free to select
the subjects of taxation.119Inequities which result from a singling out of one particular class for
taxation or exemption infringe no constitutional limitation.120

Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not


confiscatory or oppressive since the tax being imposed therein is below what the UDHA
actually allows. As pointed out by respondents, while the law authorizes LGUs to collect SHT
on lands with an assessed value of more than ₱50,000.00, the questioned ordinance only
covers lands with an assessed value exceeding ₱100,000.00. Even better, on certain
conditions, the ordinance grants a tax credit equivalent to the total amount of the special
assessment paid beginning in the sixth (6th) year of its effectivity. Far from being obnoxious,
the provisions of the subject ordinance are fair and just.

On the Garbage Fee

In the United States of America, it has been held that the authority of a municipality to
regulate garbage falls within its police power to protect public health, safety, and
welfare.121 As opined, the purposes and policy underpinnings of the police power to regulate
the collection and disposal of solid waste are: (1) to preserve and protect the public health
and welfare as well as the environment by minimizing or eliminating a source of disease and
preventing and abating nuisances; and (2) to defray costs and ensure financial stability of the
system for the benefit of the entire community, with the sum of all charges marshalled and
designed to pay for the expense of a systemic refuse disposal scheme.122

Ordinances regulating waste removal carry a strong presumption of

validity.123 Not surprisingly, the overwhelming majority of U.S. cases addressing a city's
authority to impose mandatory garbage service and fees have upheld the ordinances against
constitutional and statutory challenges.124

A municipality has an affirmative duty to supervise and control the collection of garbage
within its corporate limits.125The LGC specifically assigns the responsibility of regulation and
oversight of solid waste to local governing bodies because the Legislature determined that
such bodies were in the best position to develop efficient waste management programs.126 To
impose on local governments the responsibility to regulate solid waste but not grant them the
authority necessary to fulfill the same would lead to an absurd result."127 As held in one U.S.
case:

x x x When a municipality has general authority to regulate a particular subject matter, the
manner and means of exercising those powers, where not specifically prescribed by the
legislature, are left to the discretion of the municipal authorities. x x x Leaving the manner of
exercising municipal powers to the discretion of municipal authorities "implies a range of
reasonableness within which a municipality's exercise of discretion will not be interfered with
or upset by the judiciary."128

In this jurisdiction, pursuant to Section 16 of the LGC and in the proper exercise of its
corporate powers under Section 22 of the same, the Sangguniang Panlungsod of Quezon
City, like other local legislative bodies, is empowered to enact ordinances, approve
resolutions, and appropriate funds for the genera l welfare of the city and its
inhabitants.129Section 16 of the LGC provides:

SECTION 16. General Welfare . – Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective governance, and those which are
essential to the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among other things, the
preservation and enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of appropriate and
self-reliant scientific and technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment among their residents,
maintain peace and order, and preserve the comfort and convenience of their inhabitants.

The general welfare clause is the delegation in statutory form of the police power of the State
to LGUs.130 The provisions related thereto are liberally interpreted to give more powers to
LGUs in accelerating economic development and upgrading the quality of life for the people
in the community.131 Wide discretion is vested on the legislative authority to determine not
only what the interests of the public require but also what measures are necessary for the
protection of such interests since the Sanggunian is in the best position to determine the
needs of its constituents.132

One of the operative principles of decentralization is that, subject to the provisions of the
LGC and national policies, the LGUs shall share with the national government the
responsibility in the management and maintenance of ecological balance within their
territorial jurisdiction.133 In this regard, cities are allowed to exercise such other powers and
discharge such other functions and responsibilities as are necessary, appropriate, or
incidental to efficient and effective provision of the basic services and facilities which include,
among others, solid waste disposal system or environmental management system and
services or facilities related to general hygiene and sanitation.134R.A. No. 9003, or the
Ecological Solid Waste Management Act of 2000,135 affirms this authority as it expresses that
the LGUs shall be primarily responsible for the implementation and enforcement of its
provisions within their respective jurisdictions while establishing a cooperative effort among
the national government, other local government units, non-government organizations, and
the private sector.136

Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees and
charges for services rendered.137 "Charges" refer to pecuniary liability, as rents or fees
against persons or property, while "Fee" means a charge fixed by law or ordinance for the
regulation or inspection of a business or activity.138

The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed for
the regulation of an activity. The basis for this could be discerned from the foreword of said
Ordinance, to wit:

WHEREAS, Quezon City being the largest and premiere city in the Philippines in terms of
population and urban geographical areas, apart from being competent and efficient in the
delivery of public service, apparently requires a big budgetary allocation in order to address
the problems relative and connected to the prompt and efficient delivery of basic services
such as the effective system of waste management, public information programs on proper
garb age and proper waste disposal, including the imposition of waste regulatory measures;

WHEREAS, to help augment the funds to be spent for the city’s waste management system,
the City Government through the Sangguniang Panlungsod deems it necessary to impose a
schedule of reasonable fees or charges for the garbage collection services for residential
(domestic household) that it renders to the public.

Certainly, as opposed to petitioner’s opinion, the garbage fee is not a tax. In Smart
Communications, Inc. v. Municipality of Malvar, Batangas ,139the Court had the occasion to
distinguish these two concepts:

In Progressive Development Corporation v. Quezon City, the Court declared that "if the
generating of revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue
is also obtained does not make the imposition a tax."

In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court reiterated that the purpose
and effect of the imposition determine whether it is a tax or a fee, and that the lack of any
standards for such imposition gives the presumption that the same is a tax.

We accordingly say that the designation given by the municipal authorities does not decide
whether the imposition is properly a license tax or a license fee. The determining factors are
1awp++i1

the purpose and effect of the imposition as may be apparent from the provisions of the
ordinance. Thus, "[w]hen no police inspection, supervision, or regulation is provided, nor any
standard set for the applicant to establish, or that he agrees to attain or maintain, but any
and all persons engaged in the business designated, without qualification or hindrance, may
come, and a license on payment of the stipulated sum will issue, to do business, subject to
no prescribed rule of conduct and under no guardian eye, but according to the unrestrained
judgment or fancy of the applicant and licensee, the presumption is strong that the power of
taxation, and not the police power, is being exercised."

In Georgia, U.S.A., assessments for garbage collection services have been consistently
treated as a fee and not a tax.140

In another U.S. case,141 the garbage fee was considered as a "service charge" rather than a
tax as it was actually a fee for a service given by the city which had previously been provided
at no cost to its citizens.

Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235
violates the rule on double taxation142 must necessarily fail.
Nonetheless, although a special charge, tax, or assessment may be imposed by a municipal
corporation, it must be reasonably commensurate to the cost of providing the garbage
service.143 To pass judicial scrutiny, a regulatory fee must not produce revenue in excess of
the cost of the regulation because such fee will be construed as an illegal tax when the
revenue generated by the regulation exceeds the cost of the regulation.144

Petitioner argues that the Quezon City Government already collects garbage fee under
Section 47 of R.A. No. 9003, which authorizes LGUs to impose fees in amounts sufficient to
pay the costs of preparing, adopting, and implementing a solid waste management plan, and
that it has access to the SWM Fund under Section 46 of the same law. Moreover, Ordinance
No. S-2235 is inconsistent with R.A. No. 9003, because the ordinance emphasizes the
collection and payment of garbage fee with no concern for segregation, composting and
recycling of wastes. It also skips the mandate of the law calling for the active involvement of
the barangay in the collection, segregation, and recycling of garbage.

We now turn to the pertinent provisions of R.A. No. 9003.

Under R.A. No. 9003, it is the declared policy of the State to adopt a systematic,
comprehensive and ecological solid waste management program which shall, among others,
ensure the proper segregation, collection, transport, storage, treatment and disposal of solid
waste through the formulation and adoption of the best environmental practices in ecological
waste management.145 The law provides that segregation and collection of solid waste shall
be conducted at the barangay level, specifically for biodegradable, compostable and
reusable wastes, while the collection of non-recyclable materials and special wastes shall be
the responsibility of the municipality or city.146Mandatory segregation of solid wastes shall
primarily be conducted at the source, to include household, institutional, industrial,
commercial and agricultural sources.147 Segregation at source refers to a solid waste
management practice of separating, at the point of origin, different materials found in soli d
waste in order to promote recycling and re-use of resources and to reduce the volume of
waste for collection and disposal.148 Based on Rule XVII of the Department of Environment
and Natural Resources (DENR) Administrative Order No. 2001-34, Series of 2001,149which is
the Implementing Rules and Regulations ( IRR ) of R.A. No. 9003, barangays shall be
responsible for the collection, segregation, and recycling of biodegradable, recyclable ,
compostable and reusable wastes.150

For the purpose, a Materials Recovery Facility (MRF), which shall receive biodegradable
wastes for composting and mixed non-biodegradable wastes for final segregation, re-use
and recycling, is to be established in every barangay or cluster of barangays.151

According to R.A. 9003, an LGU, through its local solid waste management board, is
mandated by law to prepare a 10-year solid waste management plan consistent with the
National Solid Waste Management Framework.152 The plan shall be for the re-use, recycling
and composting of wastes generated in its jurisdiction; ensure the efficient management of
solid waste generated within its jurisdiction; and place primary emphasis on implementation
of all feasible re-use, recycling, and composting programs while identifying the amount of
landfill and transformation capacity that will be needed for solid waste which cannot be re-
used, recycled, or composted.153 One of the components of the so lid waste management
plan is source reduction:

(e) Source reduction – The source reduction component shall include a program and
implementation schedule which shows the methods by which the LGU will, in combination
with the recycling and composting components, reduce a sufficient amount of solid waste
disposed of in accordance with the diversion requirements of Section 20.

The source reduction component shall describe the following:

(1) strategies in reducing the volume of solid waste generated at source;

(2) measures for implementing such strategies and the resources necessary to carry
out such activities;

(3) other appropriate waste reduction technologies that may also be considered,
provide d that such technologies conform with the standards set pursuant to this Act;

(4) the types of wastes to be reduced pursuant to Section 15 of this Act;

(5) the methods that the LGU will use to determine the categories of solid wastes to
be diverted from disposal at a disposal facility through re-use , recycling and
composting; and

(6) new facilities and of expansion of existing facilities which will be needed to
implement re-use, recycling and composting.

The LGU source reduction component shall include the evaluation and identification of rate
structures and fees for the purpose of reducing the amount of waste generated, and other
source reduction strategies, including but not limited to, program s and economic incentives
provided under Sec. 45 of this Act to reduce the use of non-recyclable materials, replace
disposable materials and products with reusable materials and products, reduce packaging,
and increase the efficiency of the use of paper, cardboard, glass, metal, and other materials.
The waste reduction activities of the community shall al so take into account, among others,
local capability, economic viability, technical requirements, social concerns, disposition of
residual waste and environmental impact: Provided , That, projection of future facilities
needed and estimated cost shall be incorporated in the plan. x x x154

The solid waste management pl an shall also include an implementation schedule for solid
waste diversion:

SEC. 20. Establishing Mandatory Solid Waste Diversion. – Each LGU plan shall include an
implementation schedule which shows that within five (5) years after the effectivity of this
Act, the LGU shall divert at least 25% of all solid waste from waste disposal facilities through
re-use, recycling, and composting activities and other resource recovery activities: Provided ,
That the waste diversion goals shall be increased every three (3) years thereafter: Provided ,
further, That nothing in this Section prohibits a local government unit from implementing re-
use, recycling, and composting activities designed to exceed the goal.

The baseline for the twenty-five percent (25%) shall be derived from the waste
characterization result155 that each LGU is mandated to undertake.156In accordance with
Section 46 of R.A. No. 9003, the LGUs are entitled to avail of the SWM Fund on the basis of
their approved solid waste management plan. Aside from this, they may also impose SWM
Fees under Section 47 of the law, which states:
SEC. 47. Authority to Collect Solid Waste Management Fees – The local government unit
shall impose fees in amounts sufficient to pay the costs of preparing, adopting, and
implementing a solid waste management plan prepared pursuant to this Act. The fees shall
be based on the following minimum factors:

(a) types of solid waste;

(b) amount/volume of waste; and

(c) distance of the transfer station to the waste management facility.

The fees shall be used to pay the actual costs incurred by the LGU in collecting the local
fees. In determining the amounts of the fees, an LGU shall include only those costs directly
related to the adoption and implementation of the plan and the setting and collection of the
local fees.

Rule XVII of the IRR of R.A. No. 9003 sets forth the details:

Section 1. Power to Collect Solid Waste Management Fees . – The Local SWM Board/Local
SWM Cluster Board shall impose fees on the SWM services provided for by the LGU and/or
any authorized organization or unit. In determining the amounts of the fees, a Local SWM
Board/Local SWM Cluster Board shall include only those costs directly related to the
adoption and implementation of the SWM Plan and the setting and collection of the local
fees. This power to impose fees may be ceded to the private sector and civil society groups
which have been duly accredited by the Local SWM Boar d/Local SWM Cluster Board;
provided, the SWM fees shall be covered by a Contract or Memorandum of Agreement
between the respective boa rd and the private sector or civil society group.

The fees shall pay for the costs of preparing, adopting and implementing a SWM Plan
prepared pursuant to the Act. Further, the fees shall also be used to pay the actual costs
incurred in collecting the local fees and for project sustainability.

Section 2. Basis of SWM Service Fees

Reasonable SWM service fees shall be computed based on but not limited to the following
minimum factors:

a) Types of solid waste to include special waste

b) amount/volume of waste

c) distance of the transfer station to the waste management facility

d) capacity or type of LGU constituency

e) cost of construction

f) cost of management

g) type of technology
Section 3. Collection of Fees. – Fees may be collected corresponding to the following levels:

a) Barangay – The Barangay may impose fees for collection and segregation of
biodegradable, compostable and reusable wastes from households, commerce,
other sources of domestic wastes, and for the use of Barangay MRFs. The
computation of the fees shall be established by the respective SWM boards. The
manner of collection of the fees shall be dependent on the style of administration of
respective Barangay Councils. However, all transactions shall follow the Commission
on Audit rules on collection of fees.

b) Municipality – The municipal and city councils may impose fees on the barangay
MRFs for the collection and transport of non-recyclable and special wastes and for
the disposal of these into the sanitary landfill. The level and procedure for exacting
fees shall be defined by the Local SWM Board/Local SWM Cluster Board and
supported by LGU ordinances; however, payments shall be consistent with the
accounting system of government.

c) Private Sector/Civil Society Group – On the basis of the stipulations of contract or


Memorandum of Agreement, the private sector or civil society group shall impose
fees for collection, transport and tipping in their SLFs. Receipts and invoices shall be
issued to the paying public or to the government.

From the afore-quoted provisions, it is clear that the authority of a municipality or city to
impose fees is limited to the collection and transport of non-recyclable and special wastes
and for the disposal of these into the sanitary landfill. Barangays, on the other hand, have the
authority to impose fees for the collection and segregation of biodegradable, compostable
and reusable wastes from households, commerce, other sources of domestic wastes, and for
the use of barangay MRFs. This is but consistent with

Section 10 of R.A. No. 9003 directing that segregation and collection of biodegradable,
compostable and reusable wastes shall be conducted at the barangay level, while the
collection of non-recyclable materials and special wastes shall be the responsibility of the
municipality or city.

In this case, the alleged bases of Ordinance No. S-2235 in imposing the garbage fee is the
volume of waste currently generated by each person in Quezon City, which purportedly
stands at 0.66 kilogram per day, and the increasing trend of waste generation for the past
three years.157 Respondents

did not elaborate any further. The figure presented does not reflect the specific types of
wastes generated – whether residential, market, commercial, industrial,
construction/demolition, street waste, agricultural, agro-industrial, institutional, etc. It is
reasonable, therefore, for the Court to presume that such amount pertains to the totality of
wastes, without any distinction, generated by Quezon City constituents. To reiterate,
however, the authority of a municipality or city to impose fees extends only to those related
to the collection and transport of non-recyclable and special wastes.

Granting, for the sake of argument, that the 0.66 kilogram of solid waste per day refers only
to non-recyclable and special wastes, still, We cannot sustain the validity of Ordinance No.
S-2235. It violates the equal protection clause of the Constitution and the provisions of the
LGC that an ordinance must be equitable and based as far as practicable on the taxpayer’s
ability to pay, and not unjust, excessive, oppressive, confiscatory.158
In the subject ordinance, the rates of the imposable fee depend on land or floor area and
whether the payee is an occupant of a lot, condominium, social housing project or apartment.
For easy reference, the relevant provision is again quoted below:

On all domestic households in Quezon City;

LAND AREA IMPOSABLE FEE

Less than 200 sq. m. PHP 100.00

201 sq. m. – 500 sq. m. PHP 200.00

501 sq. m. – 1,000 sq. m. PHP 300.00

1,001 sq. m. – 1,500 sq. m. PHP 400.00

1,501 sq. m. – 2,000 sq. m. or more PHP 500.00

On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP 25.00

41 sq. m. – 60 sq. m. PHP 50.00

61 sq. m. – 100 sq. m. PHP 75.00

101 sq. m. – 150 sq. m. PH₱100.00

151 sq. m. – 200 sq. [m.] or more PHP 200.00

On high-rise Condominium Units

a) High-rise Condominium – The Homeowners Association of high rise


condominiums shall pay the annual garbage fee on the total size of the entire
condominium and socialized Housing Unit and an additional garbage fee shall be
collected based on area occupied for every unit already so ld or being amortized.

b) High-rise apartment units – Owners of high-rise apartment units shall pay the
annual garbage fee on the total lot size of the entire apartment and an additional
garbage fee based on the schedule prescribed herein for every unit occupied.

For the purpose of garbage collection, there is, in fact, no substantial distinction between an
occupant of a lot, on one hand, and an occupant of a unit in a condominium, socialized
housing project or apartment, on the other hand. Most likely, garbage output produced by
these types of occupants is uniform and does not vary to a large degree; thus, a similar
schedule of fee is both just and equitable.159

The rates being charged by the ordinance are unjust and inequitable: a resident of a 200 sq.
m. unit in a condominium or socialized housing project has to pay twice the amount than a
resident of a lot similar in size; unlike unit occupants, all occupants of a lot with an area of
200 sq. m. and less have to pay a fixed rate of Php100.00; and the same amount of garbage
fee is imposed regardless of whether the resident is from a condominium or from a socialized
housing project.

Indeed, the classifications under Ordinance No. S-2235 are not germane to its declared
purpose of "promoting shared responsibility with the residents to attack their common
mindless attitude in over-consuming the present resources and in generating
waste."160 Instead of simplistically categorizing the payee into land or floor occupant of a lot or
unit of a condominium, socialized housing project or apartment, respondent City Council
should have considered factors that could truly measure the amount of wastes generated
and the appropriate fee for its collection. Factors include, among others, household age and
size, accessibility to waste collection, population density of the barangay or district, capacity
to pay, and actual occupancy of the property. R.A. No. 9003 may also be looked into for
guidance. Under said law, WM service fees may be computed based on minimum factors
such as type s of solid waste to include special waste, amount/volume of waste, distance of
the transfer station to the waste management facility, capacity or type of LGU constituency,
cost of construction, cost of management, and type of technology. With respect to utility rates
set by municipalities, a municipality has the right to classify consumers under reasonable
classifications based upon factors such as the cost of service, the purpose for which the
service or the product is received, the quantity or the amount received, the different
character of the service furnished, the time of its use or any other matter which presents a
substantial difference as a ground of distinction.161[A] lack of uniformity in the rate charged is
not necessarily unlawful discrimination. The establishment of classifications and the charging
of different rates for the several classes is not unreasonable and does not violate the
requirements of equality and uniformity. Discrimination to be unlawful must draw an unfair
line or strike an unfair balance between those in like circumstances having equal rights and
privileges. Discrimination with respect to rates charged does not vitiate unless it is arbitrary
and without a reasonable fact basis or justification.162

On top of an unreasonable classification, the penalty clause of Ordinance No. SP-2235,


which states:

SECTION 3. Penalty Clause – A penalty of 25% of the garbage fee due plus an interest of
2% per month or a fraction thereof (interest) shall be charged against a household owner
who refuses to pay the garbage fee herein imposed. lacks the limitation required by Section
168 of the LGC, which provides:

SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. – The
sanggunian may impose a surcharge not exceeding twenty-five (25%) of the amount of
taxes, fees or charges not paid on time and an interest at the rate not exceeding two percent
(2%) per month of the unpaid taxes, fees or charges including surcharges, until such amount
is fully paid but in no case shall the total interest on the unpaid amount or portion thereof
exceed thirty-six (36) months. (Emphasis supplied)

Finally, on the issue of publication of the two challenged ordinances.

Petitioner argues that the garbage fee was collected even if the required publication of its
approval had not yet elapsed. He notes that he paid his realty tax on January 7, 2014 which
already included the garbage fee. Respondents counter that if the law provides for its own
effectivity, publication in the Official Gazette is not necessary so long as it is not penal in
nature. Allegedly, Ordinance No. SP-2095 took effect after its publication while Ordinance
No. SP-2235 became effective after its approval on December 26, 2013.
The pertinent provisions of the LGC state:

SECTION 59. Effectivity of Ordinances or Resolutions. – (a) Unless otherwise stated in the
ordinance or the resolution approving the local development plan and public investment
program, the same shall take effect after ten (10) days from the date a copy thereof is posted
in a bulletin board at the entrance of the provincial capital or city, municipal, or barangay hall,
as the case may be, and in at least two (2) other conspicuous places in the local government
unit concerned.

(b) The secretary to the sanggunian concerned shall cause the posting of an
ordinance or resolution in the bulletin board at the entrance of the provincial capital
and the city, municipal, or barangay hall in at least two

(2) conspicuous places in the local government unit concerned not later than five (5)
days after approval thereof.

The text of the ordinance or resolution shall be disseminated and posted in Filipino or
English and in the language or dialect understood by the majority of the people in the
local government unit concerned, and the secretary to the sanggunian shall record
such fact in a book kept for the purpose, stating the dates of approval and posting.

(c) The gist of all ordinances with penal sanctions shall be published in a newspaper
of general circulation within the province where the local legislative body concerned
belongs. In the absence of any newspaper of general circulation within the province,
posting of such ordinances shall be made in all municipalities and cities of the
province where the sanggunian of origin is situated.

(d) In the case of highly urbanized and independent component cities, the main
features of the ordinance or resolution duly enacted or adopted shall, in addition to
being posted, be published once in a local newspaper of general circulation within
the city: Provided, That in the absence thereof the ordinance or resolution shall be
published in any newspaper of general circulation.

SECTION 188. Publication of Tax Ordinances and Revenue Measures. – Within ten (10)
days after their approval, certified true copies of all provincial, city, and municipal tax
ordinances or revenue measures shall be published in full for three (3) consecutive days in a
newspaper of local circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local circulation, the same may be posted in
at least two (2) conspicuous and publicly accessible places. (Emphasis supplied)

On October 17, 2011, respondent Quezon City Council enacted Ordinance No. SP-2095,
which provides that it would take effect after its publication in a newspaper of general
circulation.163 On the other hand, Ordinance No. SP-2235, which was passed by the City
Council on December 16, 2013, provides that it would be effective upon its approval.164

Ten (10) days after its enactment, or on December 26, 2013, respondent City Mayor
approved the same.165

The case records are bereft of any evidence to prove petitioner’s negative allegation that
respondents did not comply with the posting and publication requirements of the law. Thus,
We are constrained not to give credit to his unsupported claim.
WHEREFORE, the petition is PARTIALLY GRANTED. The constitutionality and legality of
Ordinance No. SP-2095, S-2011, or the "Socialized Housing Tax of Quezon City," is·
SUSTAINED for being consistent ·with Section·43 of Republic Act No. ·7279. On the other
hand, Ordinance No. SP-2235, S-2013, which collects an annual garbage fee on all domestic
households in Quezon City, is hereby declared as UNCONSTITUTIONAL AND ILLEGAL.
Respondents are DIRECTED to REFUND with reasonable dispatch the sums of money
collected relative to its enforcement. The temporary restraining order issued by the Court on
February 5, 2014 is LIFTED with respect to Ordinance No. SP-2095. In contrast,
respondents are PERMANENTLY ENJOINED from taking any further action to enforce
Ordinance No. SP. 2235.

SO ORDERED.

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